Whether you own shares or take dividends from your own company, we work out the tax using the dividend allowance and rates, and make sure your return is right, so you pay the correct amount and no more.
Dividend Tax
Dividends are taxed differently from other income. You get a £500 tax-free dividend allowance, and dividends above it are taxed at 8.75 per cent for basic-rate, 33.75 per cent for higher-rate and 39.35 per cent for additional-rate taxpayers. The allowance has fallen sharply in recent years, so far more people, especially company directors, now owe dividend tax and must file a return.
Your Tax Help Accountants works out your dividend income, applies the allowance and the correct rates alongside your other income, and files your return. For company directors, we plan the salary and dividend mix so your overall tax is as low as legitimately possible.
The dividend allowance has been cut from £5,000 to just £500, so many people who never had to report dividends now do. Directors especially need to plan the salary and dividend split rather than leave it to chance.
The Detail That Matters
Dividends are taxed differently, and more lightly, than salary, but the tax-free dividend allowance has been cut to just £500, so far more investors and company directors now pay dividend tax. How dividends stack on your income decides the rate.
The first £500 of dividends is tax-free. Above that, dividends are taxed at 8.75% in the basic-rate band, 33.75% in the higher-rate band and 39.35% in the additional-rate band. Dividends are treated as the top slice of your income, so they are taxed after your salary and other income.
For company owners, dividends carry no National Insurance, which is why a small salary plus dividends usually beats a large salary. But once dividends push you into the higher-rate band, diverting profit into a pension instead can avoid the 33.75% charge entirely.
Your personal allowance can cover dividends if you have little other income, and the order of taxing income can be optimised. For couples, holding investments or company shares jointly uses two dividend allowances and potentially two lower bands.
Dividends over £500 (or over £10,000, which requires full Self Assessment) must be declared. We make sure they are reported at the right rate, in the right order against your other income, so you never overpay.
The cut to a £500 allowance means even small portfolios now generate a dividend tax bill, and many people simply do not realise they need to report dividends at all until HMRC's data flags it.
Key Figures
How We Help
We apply your £500 dividend allowance and the 8.75, 33.75 or 39.35 per cent rates depending on your band, alongside your other income.
For company directors, we set the most tax-efficient mix of salary and dividends and plan your extraction across the year.
Dividends reported accurately on your Self Assessment, combined with your other income, so you pay the correct total tax.
All the forms, calculations and correspondence handled on your behalf, so you never have to decode HMRC's rules or sit on hold.
A clear fixed fee quoted after a free call, your position explained in plain English, and never a surprise bill.
We act quickly, and where earlier years are involved we put those right too, reclaiming refunds or minimising penalties.
The shrinking dividend allowance means many shareholders and directors now owe tax and must file, often without realising. We make sure your dividends are reported and taxed correctly, and planned efficiently for directors.
Recent Client Outcome
A company director and their spouse held all the company shares in the director's sole name, pushing dividends into the 33.75% higher-rate band.
What we did. We arranged for shares to be held jointly with the spouse (who had little other income), so their dividends used a second personal allowance, a second £500 dividend allowance and the basic-rate 8.75% band, and diverted a further slice of profit into an employer pension contribution.
The outcome. Splitting the dividends across two people and two bands, plus the pension diversion, moved income out of the 33.75% rate and saved the household several thousand pounds a year in dividend tax.
The company's profits were unchanged; only the ownership and extraction were arranged efficiently, entirely within the rules.
Why People Come to Us
Questions Answered
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