Have you adapted to the cut in dividend tax allowance? As of 6 April 2024, the annual dividend allowance has been reduced from £1,000 to £500, which may be unwelcome news for many shareholders.
Here’s a detailed guide to understanding this significant change.
What is the dividend tax allowance?
The dividend tax allowance is the threshold up to which you can receive dividends without having to pay tax on them.
For the tax year 2024/25, this allowance has been reduced to £500. It’s important to note that dividends received through ISAs continue to be exempt from tax.
Tax implications if you exceed the dividend tax allowance
If your dividends exceed the £500 allowance, the tax you owe will depend on your Income Tax band.
To determine your tax band, you should combine your regular income, such as your salary, with your dividend income.
Need help?
If you need assistance understanding how these changes affect you and how you extract income and profit from your business or investments, please contact us.