Bad news if you are a company director/shareholder taking dividends

2015-06-05 13.54.10For the last forty odd years dividends have been tax free for basic rate taxpayers.

Simple example, last tax year 2015-2016, your income was

£10,600 salary and £28,600 dividends.

How much tax will you have to pay in January 2017?

Answer: Nil.  Zero tax to pay.

Let’s say this tax year (2016-2017) you have similar income

£11,000 salary (covered by tax free allowance)

and  £28,600 dividends.

You now have income tax to pay on the dividends which is

£1,770.00

(Calculated as follows: First £5,000 tax free and £23,600 @ 7.5%)

This tax (personal income tax) will be payable by 31 January 2018.

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