Fight back! Act now to save 7.5% Dividend tax!

  • by Carole Jordan
  • 18 Mar, 2016
Small business owners fighting back at the dividend tax increases

Small business owners in Limited Companies may face a 7.5% increase in their dividend tax from 6.4.16 where dividends exceed a tax free allowance of £5,000.

How can you save 7.5% Dividend tax?

Check your accumulated profits figure to see if there is sufficient profit to declare an additional dividend before 6.4.16.  

If so, you may wish to declare dividends this year rather than wait until next year when taxes are higher.  

This will be true where the extra dividends this year fall into the same or lower tax bracket than they would next year.

No cash to pay Dividends?

This doesn’t matter. Provided the paperwork is done for final dividends the amount can be left as a loan in the company and paid to the shareholders when the funds are available.

Is there a downside?

If your total income remains below £42,385 then additional dividends will not incur any additional tax. 

BUT, if your income goes above this figure in this tax year you will pay 25% on the net dividend in excess of this amount which will be due in January 2017 rather than 32.5% for the following year which will not be due for payment until 2018. 

And, if you don’t already do a tax return, you will need to do one and pay this tax in January 2017. 

So, don’t miss out and end up paying more tax next year than you need to. Take a little time now to think about your situation and decide if this would be good for you. 

If you need advice, contact Carole Jordan now as there are only 10 days left to the end of the tax year! You can call on 01273 882200, or you can email us at:

Carole Jordan FCCA is a tax and business strategist and MD of Businessheads Consultants and Accountants.

All details above were correct at the time of publishing - for more up to date information please get in touch .

You might also be interested in...

If you enjoyed the blog, why not leave us a comment, or share it with a friend...

Free advice delivered to your inbox

Browse our other blog posts...

Our latest blog

by Carole Jordan 12 Oct, 2017

This is the first in our series of blogs designed to help you better understand your business accounts. We’re kicking things off with the profit & loss report!

by Carole Jordan 09 Oct, 2017

Taking on your first employee can be an exciting time but there are some responsibilities you need to be aware of. One of them is compulsory pensions these are your auto-enrolment responsibilities. Find out what this means below.

by Carole Jordan 02 Oct, 2017

This is the second most popular question from business owners. This sounds like a simple question but the answer is complex and involves many aspects to consider. The answers will depend on the make of the car, the tax position of the owner, their business and the method of ownership.

by Carole Jordan 25 Sep, 2017

Dealing with overseas customers and VAT rules can be a bit complicated for some businesses, particularly those in retail where you may not have proof that goods are leaving the UK.
Read below to find out more about the options available to your business.

by Carole Jordan 18 Sep, 2017

If you receive rental income from a furnished residential letting then you’ll be aware of a “Wear and Tear” allowance, eligible for use against your properties. This allowance recently saw a change to its terms, read below for more details.

More posts
Share by: