News

2015 Summer Budget – Dividends

Posted on by tfp in Taxation, Planning

The 2015 summer budget announced changes to how dividend payments will be taxed as from 2016/17.

The Key points are;

Currently From 2016/17
Dividend Allowance £0 £5,000
Basic Rate Taxpayer rate 0% 7.5%
Higher Rate Taxpayer rate 32.5% on gross divi                      25% on divi net of tax credit 32.5%
Additional Rate Taxpayer rate 37.5% on gross divi                  30.55% on divi net of tax credit 38.1%

 

According to the Chancellor, the net result is that 85% of taxpayers will be better off or at least no worse off…….

Basic Rate Taxpayers

If receive dividend income above £5,000 will be worse off, because at present they pay no tax until they hit the higher rate threshold, whereas from 2016/17 they will pay 7.5% tax.

 

Higher Rate Taxpayers

They will be worse off if receive total net dividends (ie not grossed up) of over £21,667.

Currently;            21,667 x 25% = £5,416.75

From 2016/17;   (5,000 x 0%) + (16,667 x 32.5%) = £5,416.77

 

Additional Rate Taxpayers

They will be worse off if receive total net dividends (ie not grossed up) of over £25,250.

Currently;            25,250 x 30.55% = £7,713.88

From 2016/17;   (5,000 x 0%) + (20,250 x 38.1%) = £7,715.25