Dividends are a distribution of company profits to shareholders. Historically, they have been taxed as unearned income – no National Insurance deductions.<\/p>\n
This is still the case, but the Treasury have decided that the recent increase of 1.25% in National Insurance rates will also apply to dividends.<\/p>\n
Since April 2016, the rates of Income Tax applicable to dividend income have been 7.5%, 32.5% and 38.1% for basic, higher and additional rate taxpayers, respectively.<\/p>\n
Any individual who has dividend income can benefit from the dividend allowance which has been set at £2,000 since April 2018. Dividends within the allowance are not charged to tax and this will remain the case.<\/p>\n
For 2021-22, the ordinary rate, upper rate and additional rate were 7.5%, 32.5% and 38.1% respectively. These rates increased by 1.25% to 8.75% 33.75% and 39.35% from April 2022.<\/p>\n
The dividend trust rate of Income Tax was 38.1%, 2021-22. This also increased to 39.35% from April 2022 to remain in line with the additional rate.<\/p>\n
Although the 1.25% increase sounds fairly insignificant, a basic rate taxpayer with £22,000 of dividend income would pay £1,750 tax in 2022-23. The equivalent tax due for 2021-22 was £1,500. The increase of £250 represents a 17% increase in tax due even though rates have only increased by 1.25 percentage points.<\/p>\n
Director\/shareholders of small companies who have adopted a high dividend, low salary approach will see continuing benefits from this strategy, but fine-tuning remuneration packages to include the new rates may be beneficial.<\/p>\n","protected":false},"excerpt":{"rendered":"
Dividends are a distribution of company profits to shareholders. Historically, they have been taxed as unearned income – no National Insurance deductions. This is still the case, but the Treasury have decided that the recent increase of 1.25% in National Insurance rates will also apply to dividends. Since April 2016, the rates of Income Tax […]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-982","post","type-post","status-publish","format-standard","hentry","category-uncategorised"],"_links":{"self":[{"href":"http:\/\/duffyregan.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/982","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/duffyregan.co.uk\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/duffyregan.co.uk\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/duffyregan.co.uk\/index.php\/wp-json\/wp\/v2\/comments?post=982"}],"version-history":[{"count":0,"href":"http:\/\/duffyregan.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/982\/revisions"}],"wp:attachment":[{"href":"http:\/\/duffyregan.co.uk\/index.php\/wp-json\/wp\/v2\/media?parent=982"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/duffyregan.co.uk\/index.php\/wp-json\/wp\/v2\/categories?post=982"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/duffyregan.co.uk\/index.php\/wp-json\/wp\/v2\/tags?post=982"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}