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Christmas is less than two weeks away, but there are no signs of WKM Accountancy Services slowing down yet – as others are winding down, we’re working hard to help businesses get their finances in order for the new year, and submit their self assessment tax returns before January 31.

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budget 2016

Budget 2016 Summary: Important changes affecting your business

The Budget announcements that happened in March have left many of us with mixed emotions and some unaware of what it means for their business. Here is a simple breakdown of the Budget 2016 and the relevant key points that could or will affect your business this year.

Dividend tax changes

New £5,000 tax free dividend allowance is to be introduced with increased rates of dividend tax thereafter.

Personal Allowance

The amount an individual can earn before having to pay income tax is increasing to £11,000 and we expect this to rise to £11,500 in April 2017, according to an announcement made by George Osborne.

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The Guide to HMRC Tax on Dividends

If you’re a shareholder in a company, you may receive a share of its profits in the form of dividend payments. You are allowed to earn dividend income up to a certain amount without paying tax (this is known as the tax-free dividend allowance). 

Equally, you won’t pay any tax on dividends if they don’t push your total income above your Personal Allowance, which is £12,570 for the 2023/24 tax year. In some cases, you won’t have any tax to pay on your dividend income.

Beginning with the tax-free dividend allowance, this guide will go on to cover the current dividend tax rates and thresholds. To conclude, we’ll explain the process of paying tax on dividends and how this varies depending on your total dividend income.

The tax-free dividend allowance

The tax-free dividend allowance for the 2023/24 tax year is £1,000. From 6th April 2024, the dividend allowance will fall to £500.

Dividend tax rates for the 2023/24 tax year

The dividend tax rates and thresholds are based on the Income Tax bands, so the amount of tax you pay on dividend income above the allowance depends on which band you fall into. Your tax band is determined by your total taxable income (including your dividend income and your other forms of income).

The basic rate is for total taxable incomes between £12,571 and £50,270; the higher rate is for £50,271 to £125,140, and the additional rate is for incomes in excess of £125,140. The dividend tax rates for each Income Tax band are as follows:

  • Basic rate – 8.75% 
  • Higher rate – 33.75%
  • Additional rate – 39.35%

Let’s look at an example. If you have an employed income of £15,000 and in the same year you were paid a dividend of £1,000, no extra tax will be charged on dividends. However, if you had the same employed income of £15,000 and the same year received a dividend amount of £5,000, the extra £4000 would attract a dividend tax of 8.75%=£350. This is in addition to the tax you will have already paid on your employed income.

Paying tax on dividends

The process of paying tax on dividends differs depending on the amount of dividend income you received during the tax year.

Up to £10,000 in dividends

For dividend incomes of up to £10,000, you can either:

  • Let HMRC know by contacting the helpline.
  • Add the dividend income to your existing Self-Assessment tax return.
  • Ask HMRC to update your tax code, so that the amount can be deducted from your wage or pension.

Over £10,000 in dividends

If your dividend income exceeds £10,000, you will need to fill in a Self-Assessment tax return. For those who don’t usually submit a tax return, you’ll need to register by the 5th October following the tax year in which you received the dividends.

Got any questions? We’re always here to help. Give us a call or send us an email today.

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Child and Working Tax Credit

If you are unsure whether you are entitled to child or working tax credits, this article talks you through everything you need to know. The figures used in this article are correct for the 2015-2016 financial year.

Child Tax Credit

You are eligible for child tax credits for each child you are responsible for, under the age of 16 or under the age of 20 and in approved education or training. Every household differs as to how much tax credit one is entitled to. For 2015-2016, you could be entitled to a basic amount of £545 a year. This is known as the ‘family element’. You could be entitled to an extra amount depending on your income and circumstances including:

  • Up to £2,780 for each child
  • Up to £3,150 for each disabled child (on top of the child element)
  • Up to £1,270 for each severely disabled child (on top of the child element and the disabled child element)
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National Minimum Wage 2020: New Rates

The hourly National Minimum Wage rates update each April and apply for anyone who is of school leaving age. You need to be 25 or over to qualify for the National Living Wage.

If you are aged 19 or under, or are over 19 but in the first year of an apprenticeship, you will qualify for the apprentice rate (see table below):

Minimum wage rates 2020

The national minimum wage rates from 1st April 2020 are as follows:

Age 2019/2020 2020/2021 (Current Rate)
25 and over £8.21 £8.72
21 to 25 £7.70 £8.20
18-20 £6.15 £6.45
Under 18 £4.35 £4.55
Apprentices £3.90 £4.15
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