Key Points – Changes to Dividend Tax 2017
The proposed changes to the dividend tax allowance has now been withdrawn due to General Elections. The tax-free dividend allowance would have been decreased from £5000 to £2000 which would have affected small business owners and the self-employed.
Rates for Dividend Tax
The tax on dividends as it stands now is as follows:
|Dividend tax-free allowance||£5000|
|Basic rate||7.5% on earnings up to £33,500|
|Higher rate||32.5% on earnings up to £150,000|
|Additional rate||38.1% on earnings above £150,000|
Dividend Tax-Free Allowance
The dividend tax-free allowance is £5000 per year and will remain at this level for 2017/2018.
Directors of a limited company with shares in a company will receive dividends. If you have a Share ISA you will also receive dividends which are tax free. Dividends from one’s Personal Allowance must not be calculated into the tax-free dividend allowance of £5000.
Paying Dividend Tax to HMRC
If the dividend you receive is less than £5000 you do not need to pay any tax on it and you do not need to register with HMRC. However, if your dividend is £5000 -£10 000 you will need to register with HMRC for self-assessment and change your tax code.