Muras Matters: New Dividend Tax Rates

New Dividend Tax Rates

New Dividend Tax Rates

As we reported in the summer, there are significant changes to the taxation of dividends coming into effect in April 2016.

From 6 April 2016 dividend tax credits will be withdrawn and the following rates of tax will apply to dividend income over and above the new £5,000 tax free dividend allowance:

New dividend rate from April 2016

Current effective rate 2015/16


Basic rate of income tax:      



Higher rate of income tax:



Additional rate of income tax:        



Shareholders of owner managed businesses therefore have until 5 April 2016 to consider their potential tax liabilities and take advantage of tax planning opportunities.

It may be beneficial for example to pay a dividend now before the new rates commence next year, but an income tax forecast should be done to establish if this is the case. Each shareholder’s particular circumstances must be taken into account since an individual may end up being worse off by taking an additional dividend if, for example, it means higher rate tax will be incurred this year rather than basic rate tax next year.

If you are wondering whether to take additional dividends this year and would like some forecasts prepared then please contact our Tax Director, Jenny Marks.

To see our other news items please visit our Muras Baker Jones – Blog.