Dividend Tax Increase

July 21st, 2015

Some 700,000 investors will pay more tax on their dividends as a result of the change in the dividend tax system announced in the summer Budget, says the Financial Times. While 85% of investors will pay no tax on dividends, because they will get a £5,000 special annual tax-free allowance for UK dividends, a minority will pay substantially more tax. Accountants explain that the new tax rate on dividends of 38.1% for higher rate taxpayers represents a 20% increase from the old rate.

 

For wealthier investors, using tax shelters like ISAs and pensions to avoid the higher dividend tax is now even more worthwhile.