Volans, Leach & Schofield can help taxpayers in the Leeds area with queries you have regarding dividends – here is an overview of the new Dividend Allowance scheme...

A person does not have to pay tax on the first £2,000 of dividend income, regardless of the level of non-dividend income. Tax is charged on dividends received over £2,000 at the following rates:

  • 7.5% on dividend income within the basic rate band
  • 32.5% on dividend income within the higher rate band
  • 38.1% on dividend income within the additional rate band.

The Dividend Allowance does not reduce total income for tax purposes, and dividends within the allowance still count towards the appropriate basic or higher rate bands. They may therefore affect the rate of tax payable on dividends received in excess of the £2,000 allowance.

Example 1

This example, based on 2020/21 tax rates and allowances, shows the taxable amounts.

  Non-Dividend Income
£
Dividend Income
£
  18,000 22,000

Personal Allowance

12,500
Taxable at basic rate (20%) 5,500 -
Taxable at 0% (dividend allowance) 2,000
Taxable at 7.5% 20,000

Example 2

This example shows a higher rate taxpayer. The Dividend Allowance uses up some of the basic rate band and so less is available to be taxed at 7.5% rather than 32.5%.

  Non-Dividend Income
£
Dividend Income
£
  35,000 19,000
Personal Allowance 12,500 -
Taxable at basic rate 22,500 -
Taxable at 0% (dividend allowance) - 2,000
Taxable at 7.5% (up to remaining basic rate band) - 13,000
Taxable at higher rate (32.5%) - 4,000

Volans, Leach & Schofield can advise businesses in the Leeds area on a range of tax issues relating to dividends. Please contact us for more information.

Copyright

© 2021 Volans, Leach & Schofield. All rights reserved.

We use cookies on this website, you can find more information about cookies here.
Contact Us

Please call:
0113 245 7031

Quick links

Home | Contact us | Credit | Site map | Accessibility | Disclaimer | Help |


Registered to carry out audit work by the Institute of Chartered Accountants in England and Wales. Authorised and regulated by the FCA.

Our FCA Register number is 542783 which can be checked at www.fca.org.uk/register. The Financial Conduct Authority does not regulate taxation and trust advice, personal finance and some aspects of commercial property investment.

Volans, Leach & Schofield is a trading style of Volans Limited - Company number 07549089.

Registered in England and Wales with registered office at Volans, Leach & Schofield, 10 Blenheim Terrace, Woodhouse Lane, Leeds, West Yorkshire LS2 9HX .

Directors: Christopher Smart FCA CTA and Martin Knaggs FCCA.

Please check the information in the Disclaimer page before proceeding.