Dividends beyond £5k taxed wef 2016!!

[mudskipper]

It will folow the personal tax bands so

£0 - £5000 = 0%
£5000 - £43000 = 7.5%
£43,000 - £150,000 = 32.5%
£150,000+ = 38.1%

I'm confused

We all get 5K tax free right?

So the < £43K, for example, is that of dividends, or of income?

Presumably it makes sense now to pay partner dividends rather than take bigger dividend yourself?

[BlueSharp]

Contractors all need to increase their rates slightly.

That's only going to happen if the supply side gets hit. The Dividend changes certainly make contracting less financially viable and if Travel and Subsidence rules are changed could take a lot of people out of the game as local perm options become more attractive.

Only then will rates rise.

[Unix]

Good think about being a contractor is you just need to add 10% onto your next rate to make up for it.

[DaveB]

I'm confused

We all get 5K tax free right?

So the < £43K, for example, is that of dividends, or of income?

Presumably it makes sense now to pay partner dividends rather than take bigger dividend yourself?

£5k tax free, then 7.5% on any divi's paid up to the basic rate threshold, then 32.5% up to the upper rate threshold, then 38.1% after that.

Basically add 7.5% to the tax calulations for divi's paid over the basic rate.

Previously you'd have paid 0% up to the basic rate threshold, then 25% up to the upper rate and 37.5% after that.
So yes, splitting divis with a spuse who has not used their tax allowance is a good idea.

[NickFitz]

and I voted the tories in!

They did say we're all in it together. No good whining when you discover they meant you too

[mudskipper]

£5k tax free, then 7.5% on any divi's paid up to the basic rate threshold, then 32.5% up to the upper rate threshold, then 36.5% after that.

Basically add 7.5% to the tax calulations for divi's paid over the basic rate.

So yes, splitting divis with a spuse who has not used their tax allowance is a good idea.

OK, makes sense. And 5K to spouse in any case. He'll be pleased.

[surfcalavera]

the maths

for 100K profit tax man will take 20K CT

for the rest 80K of dividends he will take :
of 5000 at 0% 0
of 38000 at 7.50% 2850
of 37000 at 32.50% 12025

£14875 in total dividend tax on 80k dividends

or 18.6% combined tax on dividends

with 20K CT it will make 34875 total taxes, or 34.8% from the company gross profit.
although CT is really irrelevant at this point -- no change here.

[SimonMac]

I'm confused

We all get 5K tax free right?

So the < £43K, for example, is that of dividends, or of income?

Presumably it makes sense now to pay partner dividends rather than take bigger dividend yourself?

Income

[SpontaneousOrder]

It will folow the personal tax bands so

£0 - £5000 = 0%
£5000 - £43000 = 7.5%
£43,000 - £150,000 = 32.5%
£150,000+ = 38.1%

is that

£5000 - £43000 = 7.5%,

or

£10600(11000?) - £43000 = 7.5% ?

[psychocandy]

£5k tax free, then 7.5% on any divi's paid up to the basic rate threshold, then 38.1% up to the upper rate threshold, then 36.5% after that.

Basically add 7.5% to the tax calulations for divi's paid over the basic rate.

Previously you'd have paid 0% up to the basic rate threshold, then 25% up to the upper rate and 37.5% after that.
So yes, splitting divis with a spuse who has not used their tax allowance is a good idea.

I read it as first £5K of dividend income per year is 0%. After that its 7.5% etc.