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.
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.
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.
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: email@example.com.
All details above were correct at the time of publishing - for more up to date information please
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