Significant changes have been made to the way dividends are taxed under the guise of simplification.
Dividend Regime from 6th April 2018
The company pays tax at 19% on its profits, with this falling to 18% from 1 April 2020.
Dividend distributions to shareholders will be taxed as follows:
- No tax on the first £2,000 of dividends.
- 7.5% tax on dividends up to the Basic Rate band (£46,350 in 2018/19)
- 32.5% tax on dividends above the Basic rate.
- 38.1% tax on dividends above £150,000.
What this means for you
The option of taking dividends remains better than a higher salary from the company but taxpayers will need to consider all their income sources carefully before deciding on dividend levels from family companies.
For further information contact us on 0121 783 5392 or get in touch.