Stand-out Q – dividend income tax credit…
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How is dividend income to be taxed from 6 April 2018?
Up to and including 2015/16, dividend income received was grossed up and a non-refundable 10% tax credit was applied. The dividend tax credit was abolished from 6 April 2016 meaning that grossing up calculations were no longer required for dividend income received, and the taxation of dividends was reformed. A tax-free Dividend Allowance of £5,000 was introduced but from 6 April 2018 this will be reduced to £2,000. It should be noted that the Dividend Allowance does not reduce an individual’s total income for tax purposes.
Once the Dividend Allowance has been exhausted, the following income tax rates apply.
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