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Dividends - a reminder

Posted on May 03, 2016

Jar of dividends

As annual return time arrives for share schemes, it's important to remember the changes that apply to the taxation of dividends.

As of 6 April this year, there is no longer any such thing as a dividend tax credit.

The tax treatment relating to dividends paid to UK resident individuals is now as follows:

• First £5,000 of dividends: tax free
• Dividend income exceeding £5,000 is taxed according to the individual's own tax rate:

  • Basic rate taxpayers – 7.5%
  • Higher rate taxpayers – 32.5%
  • Additional rate tax payers – 38.1%

Note that the first £5,000 of dividends is free from tax but the amount is still included in the taxpayer's annual income. This can make a difference to the rate of tax charged on dividends paid above the £5,000 exempt amount.

More information is available from HMRC here.

If you need guidance on preparing annual returns for your share schemes, contact the RM2 Operations team: operations@rm2.co.uk.


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