dividend allowanceAs I have had a number of questions about the Dividend Allowance, I thought I would outline how it works.

In essence the Dividend Allowance sounds simple – the first £5,000 of dividends received in a tax year is tax-free. After that you pay tax depending on your other income for the year, 7.5% if your a Basic Rate tax payer, 32.5% for High Rate taxpayers, and 38.1% for Additional Rate taxpayers.

However, it is possible that you don’t use all of your Personal Allowance. In that case the unused part is still available as well as the £5,000 annual Dividend Allowance.

Generally this is a backward step for shareholders. Additionally the Allowance is reducing to £2,000 in the 2018/19 tax year.

Despite this there are opportunities for working spouses that didn’t exist before.

If that applies to you, or you have any other questions about the Dividend Allowance, get in touch through the website on our Contact Us page or give us a call.

If you want more details here’s a link to HM Revenue & Customs guidance.

Author: Steve Lincoln

Forward thinking accountant and cloud accounting champion, Steve believes all businesses should benefit from the better service made possible by the new technology.

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