Dividend Tax - The False Rumour

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!