Dividend rules can catch out the unwary
The tax rules surrounding dividends are catching some people out, resulting in unnecessary tax bills. With careful planning many of these tax bills could be avoided.
The dividend rules
April 2016 saw the introduction of new tax rules regarding dividends, including
- Individuals being entitled to a tax-free dividend allowance, and
- Dividend income in excess of this allowance being taxed at 7.5%, 32.5%, or 38.1% depending upon an individual’s level of income.
One of the biggest issues for owner-managed companies is where owners have taken dividends each year to top their income. Many of these company owners may well have taken dividends to top up their income to the higher rate tax threshold. Given the complexities of the dividend rules and allowances it is worth regularly reviewing this position.
Sole traders and Partnerships
Another group that need to be aware of the dividend rules are the self-employed, whether sole traders or partners in a business. Why you may ask, given they won’t be receiving dividends?
Well the simple answer is that for self-employed businesses, especially ones growing, there can come a point where it is much more tax efficient to operate the business through a limited company instead, and there can be a number of other reasons for operating through a limited company should profits suffice.
The ways dividend are taxed could have an impact on when this decision is made, or the potential tax savings to be enjoyed. And so given the complexities surrounding such a decision we are offering a Dividend Impact Review service to help those interested in reviewing their situation. Further details and how you could secure your FREE review are given below.
If you hold shares in exempt savings such as ISA’s or pensions then these are not affected by the recent dividend tax changes or the planned reduction in dividend allowance.
However share investments could be affected. Depending upon your circumstances it may be worth considering options such as re-organising your investments, or considering more capital growth investments rather than income generating.
Again we would be happy to review your position with you and explain the options thoroughly as part of our Dividend Impact Review service.
The new dividend tax rules could create a problem for some individuals, who previously have not needed to complete a self-assessment tax return. If tax is due on their dividend income then they will need to notify HMRC and may need to complete and submit a self-assessment tax return, which could catch many individuals out who have never needed to complete a tax return.
Our new Dividend Impact Review Service
We are today launching our Dividend Impact Review service. We will be able to identify whether the changes will impact on you whatever your circumstances, quantify the potential impact, and what action can be taken.
The service is normally worth £675 + VAT but we are offering it free to the first 40 customers.
And so if you are interested in finding out how the changes impact on you and what action to take please contact us now on 0333 300 1887, and book your Dividend Impact Review.