The way that dividend income is taxed changed significantly on 6 April 2016. This affects owners of UK limited companies, so it's important to understand what's ahead and what needs to be done.
It's likely that thousands of owners of small limited companies will see a rise in the amount of tax they'll have to pay. There will be a £5000 tax free limit and dividend income over this amount (after using up your personal allowance) will be taxed as follows:
*7.5% for basic rate taxpayers,
*32.5% for higher rate taxpayers and
*38.1% for those on the highest incomes who pay additional rate income tax.
Paying more is never a welcome prospect.
The deemed tax credit for dividends will be scrapped from 6th April 2016. Instead all dividends will be treated as gross. There will be a £5,000 tax free band, then dividends are will be taxed at 7.5% for basic rate tax payers (up to £43,000 for 2016/17) and 32.5% for higher rate tax payers.