Stand-out Q – dividend income tax credit…

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TUE, 06 FEB 2018

Our Technical Hub provides access to a wide range of pension tax and trust technical resources. Every now and then we post tweets covering stand out questions from our technical content and our answers in case others might also find them helpful. As Twitter’s character restrictions only allow for the bare bones of the Q&A we link to the details here, too.

Question:

How is dividend income to be taxed from 6 April 2018?

Answer:

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.

table for blog div inc

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