The standard dividend tax rates of 0%, 7.5%, 32.5%, and 38.1% are well known. However, did you know that the dividend tax rates jump to 43% – 55% (on top of the 19% corporation tax already paid) if your total gross personal income is between £50,000 – £60,000 (if you are in receipt of child benefit) and between £100,000 – £125,000 (as you begin to progressively lose your tax-free personal allowance).
Therefore care should be taken when you pay out dividends from your company in order to avoid any surprise tax charges. Is it time to consider paying the 32.5% section 455 director’s loan tax and repaying the loan at a later date rather than paying the 43% – 55% dividends tax?
Please note that the section 455 director’s loan account tax is refundable once the loan is repaid and associated corporation tax return submitted. Beneficial loan account interest will also need to be accounted for on director’s loans greater than £10,000.
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AR Tax Accountants
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The above information is just for guidance purposes only and is not a substitute for professional advice and consulting the legislation.
