Beware dividend tax changes

If you are incorporated as a limited company or incorporation is something you are considering here’s important information about dividend tax changes in April 2016. Changes also apply if you are an associate trading as a limited company.

The majority of earnings are likely to be paid out of the company via dividends. Currently, UK dividends are paid with a notional 10 per cent tax credit; as of April 2016, the dividend tax credit is being scrapped and replaced with a tax-free dividend allowance of £5,000 per year for each shareholder. Additionally, the income tax attributable to dividends is increasing by 7.5 per cent within each income tax band, including the basic rate band – which was previously tax free.

Hayley Hudson ACA, Manager for PFM Townends LLP, says: “There are a number of beneficial reasons to incorporate as part of a tax planning scheme, however, there are many factors to consider. Incorporation should be analysed on a case-by-case basis to ensure it is indeed the best course of action.

“At PFM Townends we always proactively discuss all the advantages and disadvantages with our clients.”

For more information visit www.pfmdental.co.uk