Learn about the changes in taxation that will impact on your dividend income. With tax hikes around the corner, learn how to plan your dividend strategy in order to maximise the income in your pocket.
The rules for taxation on dividends currently are as follows: –
– Each individual is entitled to a £2,000 a year tax-free dividend allowance,
– Dividend income in excess of this allowance is taxed at: –
o if dividend within basic rate tax band – 7.5% in 21/22 and 8.75% 22/23,
o if dividend within higher rate tax band – 32.5% in 21/22 and 33.75% in 22/23
o if within additional rate tax band – 38.1% in 21/22 and 39.35% in 22/23
Firstly, we should consider whether we have made use of the dividend free allowance. Certainly, we must ensure that so long as our company has reserves, we should make use of the tax-free dividend income of £2,000.
Thereafter, as taxation on dividends is increasing in 2022-23 (see above) we should consider declaring a higher dividend before 5 April 2022 so long as the extra income does not take us into a higher tax bracket.
Look at the impact of your remuneration strategy on your personal tax liabilities and make sure you are taking advantage of all the tax breaks that are available to you.
Book a year-end tax planning review with one of our accountants as we probably can save you some tax and leave more money in your pocket for you and your family. If you would like us to carry out a review email Jayne Cox on jayne@jamesstanley.co.uk
