Can you protect your dividends from new tax rate?

Did you know that the Government plans to add 1.25% on the dividend tax rate.  You can receive £2,000 of dividends a year tax free but after that the tax rate is 7.5% for basic taxpayers and 32.5% for higher taxpayers.  This is planned to rise to 8.75% and 33.75% respectively in April 2022.  This means a basic taxpayer will pay £263 in tax, up from £225 on £5,000 of dividend payments.  For a higher taxpayer this will e £1,013 up from £875.

To protect your dividend income it would be worth considering where your investments are held; ISAs and pensions are free from dividend tax and do not count towards the £2,000 annual allowance.  Also if you are married, you should ensure you use both of your  ISA and pension allowance to protect your dividend payments.

For a free consultation to help with your financial and tax affairs, contact us today.