Duty on profits / Tax on dividends1. How dividends are taxed
How profits are burdened / How dividends are taxed?
Client’s might get a dividend payment assuming their own shares in a company.
They likewise get a dividend allowance every year and they just pay tax on any dividend income over the dividend allowance. Similarly can earn some dividend income every year without paying tax.
They don’t pay tax on any dividend income that falls inside their Personal Allowance (the measure of income you can earn every year without paying tax).
Client’s find it very difficult to calculate and maintain the records and are unable to follow-up with tedious paper-work.
CAPS-IT will calculate tax on dividends from shares in an ISAProfit recompense / Dividend allowance
Tax year Dividend allowance
6 April 2021 to 5 April 2022 £2,000
6 April 2020 to 5 April 2021 £2,000
6 April 2019 to 5 April 2020 £2,000
6 April 2018 to 5 April 2019 £2,000
6 April 2017 to 5 April 2018 £5,000
6 April 2016 to 5 April 2017 £5,000 The rules are different for dividends before 6 April 2016.
Working out charge on profits / Working out tax on dividends
How much expense pay on dividends over the dividend allowance relies upon your Income Tax band?
From April 2022 tax on dividend income will increase by 1.25% to help support the NHS and social care.
Tax band Tax rate on dividends over the allowance
Basic rate 7.5%
Higher rate 32.5%
Additional rate 38.1%
Pay tax on over £10,000 in dividends client’s need to fill in a Self Assessment tax return.