The 10% tax credit on dividends was abolished on 6th April 2016 and, in its place, a new tax-free Dividend Allowance was introduced for everyone.
Any dividends received in excess of the Dividend Allowance (currently £2,000) and any unused Personal Allowance (currently £11,850) combined will be taxed at varying rates (see table below). Individuals who receive dividends of more than £2,001 may need to complete self-assessment tax returns.
|Tax band*||Dividend Allowance||Personal Allowance||Any dividends received in excess of these amounts will be taxed at:|
|Basic rate taxpayers||£2,000||£11,850||7.5%|
|Higher rate taxpayers||£2,000||£11,850||32.5%|
Please note: the Personal Allowance on £11,850 should not be confused with the Personal Savings Allowance.
What does this mean for Chelsea's clients?
All a bit complicated?
Remember that an ISA wrapper negates the need for any of these considerations:
Please note that the amount of dividend income paid in an ISA will not increase as a result of the tax credit being abolished. The 10% credit was entirely notional and the changes simply mean that the tax credit will no longer be reported.
Read more about the benefits of the ISA.