Dividends - a reminder

Posted by admin at 15:52 on 13 Feb 2017

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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.