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Impact of the Dividend Tax 17/18 Financial Year
The dividend tax enters its second year for Owner/Directors of small to medium Limited Companies and the impact increases.
Previously the dividends that you took were effectively tax free up to the higher rate tax band, in the 2016-17 financial year a dividend tax was introduced that taxed the dividends that you receive from your limited company at the rate of 7.5%, whilst on the face of it this does not seem to be a high rate of taxation, it does kick in after just a small £5,000 of exempt dividends, in effect for a owner/ director taking dividends on top of the directors optimal salary, this had the effect of increasing the personal tax charge from zero to £2,025, a not insignificant amount of money.
In the current year, the dividend tax 17/18 has only a £2,000 exemption before the 7.5% charge is applied., this is likely to cost you another £225 per year assuming that you do not take dividends above the higher tax rate.
For more information relating to the dividend tax 17/18 or any other matter concerning profit extraction from Limited Companies, please call us for an informal chat on 01666 829013, or see the information on our main website