Lily Kholar's blog : TAX ON DIVIDENDS
Dividend payments from profit-making companies or small limited companies may be taxable. Dividend payments are subject to tax only if the dividend income exceeds the Personal Allowance threshold of £12,570 in 2022/23. A Dividend Allowance of £2,000 is available each year, which is tax-free.
Dividend payments received from shares held in ISAs are also tax-free. Understanding the rules around the taxation of dividends helps ltd company accounts remain compliant with HMRC regulations.
TAX Band Dividends
The tax rate on dividend payments depends on your Income Tax band. Basic rate Income Taxpayers (taxable income of £12,571 to £50,270) pay 8.75% tax on dividend payments over the Dividend Allowance (£2,000), higher rate Income Taxpayers (taxable income of £50,271 to £150,000) pay 33.75%. Additional rate Income Taxpayers (taxable income over £150,000) pay 39.35%.
1.25 percentage points increased these rates in April 2022. Dividends are included in your taxable income when determining your tax band.
Pay Dividends on Time
HMRC doesn't require you to report dividends under £2,000 in total. However, if your dividend payments are taxable, you can report them by calling HMRC, asking for a tax code change, or writing them on your Self-Assessment tax return.
The closing date for filing a Self-Assessment tax return is October 5th, after the end of the tax year is £10,000 for those unregistered for Self-Assessment.
The taxation of dividends can be a baffling and complex process. Tax accountants are essential in helping individuals and companies understand the laws and regulations governing dividend taxes.
Tax accountants are also responsible for ensuring taxes are paid in full, on time, and correctly. By helping companies make informed decisions about dividend taxes, tax accountants can help them save money over time.
Additionally, they can assist individuals in minimizing their dividend tax liabilities through careful investment planning.
- Career
- Expert
- Jobs
- News