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Dividend tax

Tax on dividends

March 03, 2017 | No Comments

Dividend tax

Despite the withdrawal of the dividend tax credit, a small salary and higher dividends often remains the most tax efficient method of paying yourself.  Rest assured that each year the team here look at your total income and work out what’s best for you personally.

That said, the introduction of the 7.5% income tax on dividends does mean that many of our clients will be facing an increased tax liability this year.

By way of example, if you had a basic salary of £8,000, a net dividend of say £41,000 and other income of £6k in 2015/16, you had a tax liability of approximately £2,000.  Working on exactly the same figures this year, your tax liability will be approximately £3,600 which is an 80% increase in tax.  In addition to this, you will then need to pay the 50% payment on account for the following year on this higher figure.

We’ll be doing illustrations for our clients throughout the year, and it would be great if you could get your tax return information to us as soon as you possibly can.  Cashflow is critical and we want to be able to give you plenty of notice of your likely 31 January 2018 tax liability.

If you have any questions, please contact Michael Burgess on 01782 279615.