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The proposed changes to the dividend tax allowance has now been withdrawn due to General Elections.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.

Receiving Dividends

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.

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