INVESTORS beware! A major reform to dividend taxation was announced in the recent budget that will affect all investors, whether they are company owners or simply holders of quoted shares.

This week we will concentrate on the holders of quoted shares.

The changes, which come into effect on April 6, 2016, are that:-

 

The first £5,000 of dividend income will be exempt from tax.

The balance of any dividend income will be taxed at the following rates:-

  • 7.5 per cent if you are a basic rate taxpayer;
  • 32.5 per cent if you are a 40 per cent rate taxpayer;
  • 38.1 per cent if you are a 45 per cent rate taxpayer.

If your tax bill is going to rise then consider transferring some of your shareholdings to your spouse/civil partner to utilise their dividend income exemption/lower tax rates or into an ISA.

However, you should start to plan NOW!

For more information or assistance contact Nick Parker, based at Baker Tilly’s Basing View Springpark House offices, on 01256 486814 or email him at nick.parker@bakertilly.co.uk.