From 6 April 2018 the dividend allowance was reduced to £2,000 from £5,000. The result this will have on your tax bill depends on where the £5,000 allowance falls in your personal tax computation.

If the allowance previously fell within your basic rate band then you will have an additional £3,000 (£5,000 – £2,000) charged to tax at 7.5% giving an additional liability of £225. A higher rate tax payer will see an increase of £975 and it will cost an additional rate tax payer £1,143.

The above only considers where the full allowance falls wholly within one band. If the dividend allowance spans across 2 bands the additional tax will be different from the figures above. Also the increase in personal allowance and tax bands have not been considered.

If you would like more detailed guidance on how exactly the change is going to impact you please contact us on 01228 534 371.

Alex Dent, Chartered Accountant Carlisle Office
Alex Dent,
Chartered Accountant
Carlisle Office