Dividend Tax 2017/18

Impact of the Dividend Tax for the 2017/18 Financial Year

The dividend tax enters its second year for Owners/Directors of small to medium Limited Companies and the impact increases.

Previously the dividends that you took were effectively tax-free up to the higher rate tax band, in the 2016-17 financial year a dividend tax was introduced that taxed the dividends that you receive from your limited company at the rate of 7.5%, whilst on the face of it this does not seem to be a high rate of taxation, it does kick in after just a small £5,000 of exempt dividends, in effect for an owner/ director taking dividends on top of the directors optimal salary, this had the effect of increasing the personal tax charge from zero to £2,025, a not insignificant amount of money.

In the current year, the dividend tax 17/18 has only a £2,000 exemption before the 7.5% charge is applied., this is likely to cost you another £225 per year assuming that you do not take dividends above the higher tax rate.

For more information relating to the dividend tax 17/18 or any other matter concerning profit extraction from Limited Companies, please call us for an informal chat on 01666 829013, or see the information on our Limited Companies page.