Dividend Tax Rises Effective 6th April 2022

Limited Company, News, Personal Tax,

As announced in the Autumn Budget, Dividend Tax is due to increase by 1.25% for all dividends you receive from 6th April 2022 onwards. This is to ensure that there is a balance between amounts paid by the employed, who will pay extra National Insurance contributions towards the new Health & Social Care Levy and those that receive their income though Dividends.

There are currently three bands of Dividend Tax, which are increasing as follows:

  • Basic rate: From 7.50% to 8.75% (Dividend Income over £14,570 and below £50,270)
  • Higher rate: From 32.50% to 33.75% (Dividend Income above £50,270 and below £150,000)
  • Additional higher rate: From 38.10% to 39.35% (Dividend Income over £150,000)

The actual extra amount you’ll pay will depend on income from other sources and your total dividend income in the year. These rates apply to the dividends you may earn from your Limited Company, but also include any dividends you earn from any investment portfolio you may have.

You may choose to make full use of any unused allowances before the end of the tax year so those dividends qualify for the old levels of Dividend Tax.

Either way, NOW is the time to consider making any decisions, rather than once the tax year closes and the new rates become applicable.

Dividend Tax is complex, and it’s important to make sure that you look at your entire income situation to make the right decisions. If you’re at all unsure, please get in touch and we can chat through your best options. Everyone’s position will be different on this one!

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