Last chance saloon for director-shareholders!

If you own shares in your own company, continue reading!

As we have reported on a few occasions, a new dividend tax will come into force in 2016/17 (tax year starting on 6 April 2016) and director-shareholders may need to act quickly if they are to take advantage of the lower dividend tax rates in the current tax year - 2015/16.

The table below shows the comparative rates (ignoring the new £5,000 dividend allowance) of dividend taxation for 2015/16 and 2016/17:

 

Dividend income falling into:

Tax Rate – 2015/16

Tax Rate – 2016/17

Basic rate tax band

0%

7.5%

Higher rate tax band

25%

32.5%

Additional rate tax band

30.6%

38.1%

 

There is therefore a potential 7.5% tax saving on any dividend voted before 6 April 2016 and you should consider whether bringing forward the payment date of a dividend may save some tax. Of course, this depends upon your individual circumstances which should be discussed with us before deciding when to take a dividend.

As you may be aware, the 2016 Budget will be held on 16 March 2016 and it is not beyond the realms of possibility that the Chancellor may introduce measures to block any advantage of declaring a dividend between that time and 5 April 2016, so urgent consideration needs to be given to this matter.

If you wish to speak to a member of our tax team, then for Darlington call Alan Moore, Lee Watson or Alison Welch (01325 349700), for Durham call Nicola Bellerby or Alison Welch (0191 384 2244) and for York call Alan Moore or Graham Richardson (01904 784400).