The dividend tax-free allowance has been reduced from £5,000 to £2,000 from 6th April 2018 after the Chancellor, Philip Hammond announced this last year in the 2017 Budget.
The significant decrease in the tax-free allowance will affect employees and directors of small businesses who are paid wholly or partly through dividends as opposed to a salary.
For dividends above £2,000, the tax you pay is based on your tax band (marginal tax rate). The different dividend tax rates are:
Income tax band
Basic rate 7.5%
Higher rate 32.5%
Additional rate 38.1%
For those receiving more than £10,000 in dividends you will need to complete a Self Assessment.
If you require further information on this or require assistance then call us on 0113 2864486.
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