UK and International Tax news
HMRC Issues Dividend Allowance Factsheet
Monday 7th September 2015
HMRC has recently issued a ‘Dividend Allowance Factsheet’ which sets out a new tax regime for dividends, together with examples, in which the current dividend tax credit will be replaced by a tax free dividend allowance. The regime will also introduce higher rates of income tax on dividends received above this allowance amount, which will not reduce an individual’s total income for tax purposes.
The Chancellor announced in his July 2015 Budget that the taxation of dividends is to be reformed from 6 April 2016. The 10% dividend tax credit will be abolished and in its place, individuals will have a £5,000 dividend tax allowance. An individual will pay no income tax on dividend income received up to that amount. Dividend receipts in excess of £5,000 will be taxed at 7.5% for basic rate taxpayers (previously 0%), 32.5% for higher rate taxpayers (previously 25%), and 38.1% for additional rate taxpayers (previously 30.56%).
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