One of the surprises of the Summer Budget was announcement of new tax rules for dividends from April 2016.
Dividend taxation has long been one of the more arcane parts of the UK’s complex tax regime. For many years dividends have had their own tax rates and a 10% tax credit that has not been reclaimable by tax-exempt investors. Mr Osborne announced a new regime on 8th July, to begin from 2016/2017:
The surprising result of these proposals is that while basic rate taxpayers will pay more tax if they receive dividends above £5,000, additional rate taxpayers will have to receive over £25,370 of dividends before they are worse off. These changes could mean that you need to review your investments, the wrappers in which they are held and their ownership. For example, the reforms suggest that a married couple should share their dividend income up to a total of £10,000 to maximise the benefit of the new allowance.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.
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Mearns & Company are authorised and regulated by the Financial Conduct Authority