Dividends - a reminder
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: email@example.com.