News

Taxation of Dividends: a new regime for individuals

  • September 04, 2015
  • By Hunters Law

In the July Budget, the Chancellor announced substantial changes to the taxation of dividends for individuals.

With effect from 6th April 2016, dividends will no longer be paid to individuals with a notional 10% tax credit.  Part of the rationale behind the notional 10% tax credit was that it mitigated double taxation, as dividends are paid out of company profits which have been subject to Corporation Tax.  The 10% dividend tax credit also simplifies matters for basic-rate and non-taxpayers, with no further tax liability for them on dividends received.

Under the new regime, every individual will have a dividend tax-free allowance (in addition to the Personal Allowance for Income Tax) of £5,000 per tax year.  Dividends received in excess of £5,000 will be taxed as follows:

  • 7.5% for basic rate taxpayers (under the current system they pay no Income Tax);
  • 32.5% for higher rate taxpayers (under the current system they pay Income Tax at an effective rate of 25%); and
  • 38.1% for additional rate taxpayers (under the current system they pay Income Tax at an effective rate of 30.56%).

In short, individuals who receive substantial dividend income, such as business owners and private investors, will pay more Income Tax under the new rules. However, most small investors will pay a similar amount in Income Tax to what they pay under the current rules.

The new dividend taxation regime will not affect the tax reliefs for dividend-producing investments in pensions and ISAs.

For more information, please contact the partner having responsibility for your affairs, or any partner in the Private Client Department.

Related News

Feb 09, 2021
Molly Wills discusses The Office of Tax Simplification’s First Report on Capital Gains Tax, in Private Client Business
Jan 06, 2021
Molly Wills discusses The Office of Tax Simplification’s review of Capital Gains Tax
Nov 30, 2020
Julia Richards examines section 33 of the Wills Act 1837 in WealthBriefing
Nov 13, 2020
Julia Richards examines section 33 of the Wills Act 1837 in the case of Re estate of Ellen Beatrice Brackstone [2020]
Oct 29, 2020
Julia Richards examines Section 33 of the Wills Act 1837
Oct 28, 2020
Daniel Watson examines Wills being witnessed remotely by video-link in Taxation
Sep 21, 2020
Hunters recognised as one of the 2020 eprivateclient Top Law Firms
Sep 04, 2020
Matthew Yates comments on video wills in the Financial Times
Aug 11, 2020
Daniel Watson examines the government’s newest legislation regarding Wills in Lawyer Monthly
Aug 04, 2020
Matthew Yates examines the recent change to the law of organ donation in England in STEP Journal

© Hunters Law LLP 2021 | Privacy NoticeLegal & Regulatory | Cookies Policy | Complaints Procedure.

Hunters Law LLP is authorised and regulated by the Solicitors Regulation Authority (number 657218)

WARNING: Website falsely claiming to be Hunters Law

4 March 2021

The website 'hunterslawllp.com' is operating, falsely claiming to be Hunters Law. This website has been created to mirror the genuine site, although contact details including telephone number and email addresses have been changed, and the SRA verification badge does not work.

We have also been made aware of a series of faxes circulating, purporting to come from ‘barrister’ Dominik Opalinski, advising of an unclaimed inheritance of $16.95M, which feature the same website address. Dominik is a genuine partner of the firm, but is not a barrister.

We have reported this to the SRA, and contacted the website domain hosts to request its urgent removal. If you receive correspondence of a similar nature to that described, please contact us directly by reliable and established means.