When to pay dividends this year in light of the new dividend regime or What a difference a day makes – tax on dividends paid on 5th April v. tax on dividends paid on 6th April 2016.
Many will be feeling a lot lighter following the tax payment deadline; with the start of the fiscal year soon to follow those with their own personal companies really must consider the impact of the dividend regime and how it is going to affect their tax liabilities.
The tax consequences between paying a dividend before and after the end of the tax year are laid out below:
New dividend regime – from 6 April 2016 Current dividend regime – to 5 April 2016
| Dividend payment | Tax due | Dividend payment | Tax due |
|---|---|---|---|
| £5,000 | £nil | £5,000 | £nil |
| £10,000 | £375 | £10,000 | £nil |
| £30,000 | £1,875 | £30,000 | £348 |
| £50,000 | £7,875 | £50,000 | £5,348 |
| £100,000 | £26,600 | £100,000 | £22,353 |
| £150,000 | £45,941 | £150,000 | £36,217 |
| £200,000 | £64,991 | £200,000 | £51,494 |
Note: The table is based on an assumption that the personal allowance has been utilised by non-savings income earned in the year. It also assumes that the individual has no other taxable income or any reliefs available.
Of course paying a dividend in an earlier tax year will bring forward the tax due date by 12 months so the negative cash flow implications will need to be taken into account as well as the tax savings when considering whether to take dividends early.
The new regime comes into effect on 6 April 2016, to avoid falling within the new regime dividends must be paid before then.
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