We've heard that a rumour is doing the rounds saying that Dividend tax only applies to companies who are older than 2 years.
The first thing to point out is that the new dividend tax is a personal tax not a company tax.
Companies do not pay Dividend Tax - individuals pay it.
So clearly the rumour is daft just on that basis but to make it very clear ...
The new dividend tax applies from 6 April 2016.
It applies to anyone in receipt of dividends.
From 6 April individuals in receipt of dividends will be subject to tax as follows:
- First £5,000 of dividends - tax free
- Dividends falling within basic rate tax (caution on how this is calculated) - 7.5%
- Dividends falling within higher rate tax - 32.5%
- Dividends falling within the additional rate of tax - 38.1% but remember that for income over £100,000 your personal allowance starts to get restricted
Note - the 10% tax credit is abolished.
Dividend tax rule of thumb
The dividend tax rule of thumb to use is:
- take a salary of £8,052
- tax free dividends of £7,948
- £75 of tax per £1,000 of dividends from £7,949 up to total dividends of £34,948
- £325 of tax per £1,000 of dividends over £34,949
If your income exceeds £100,000 obtain a personalised quotation as it gets really complicated!