From 16-17 new rules have been introduced which will affect the way dividends are taxed on individuals.
The tax credit which is currently associated with a net dividend is being abolished so there will be no more grossing up of a net dividend. A dividend tax allowance is being introduced which will make the first £5000.00 of dividend income tax free, no matter what level of income a person has. Any further dividend received in the tax year will be taxed at 7.5% 32.5% or 38.1% depending on if the income is in the basic, higher or additional rate band.Dividends within your allowance will still count towards your basic or higher rate bands and may therefore affect the rate of tax you pay on dividends you receive in excess of the £5000.00 allowance.
This will impact on many people and we are happy to discuss you situation on a one to one basis to ensure you remain as tax efficient as possible within the new rules.