Hello again, company directors and shareholders! It’s time to revisit the thrilling topic of dividend taxes. 😅 The rules are set to change for the 2024/25 tax year, so let’s make sure you’re up to speed.
Dividend Allowance Takes Another Hit
In the 2022/23 tax year, the tax-free Dividend Allowance was reduced to £1,000. Well, get ready for another blow because, in 2024/25, the allowance will be cut down to just £500. 😞
Tax Rates for 2024/25
Here’s how the dividend tax rates will look in the 2024/25 tax year:
– Basic rate taxpayers: You’ll be paying 8.75% on dividends above the £500 allowance.
– Higher rate taxpayers: Prepare to hand over 33.75% on dividends above the allowance.
– Additional rate taxpayers: You’ll be facing a hefty 39.35% on dividends above the allowance.
Dividend Tax Examples for 2024/25
Let’s see how these changes might impact you:
1. Basic rate taxpayer with £3,000 in dividends:
– £500 tax-free
– £2,500 taxed at 8.75% = £218.75 in dividend tax
2. Higher rate taxpayer with £5,000 in dividends:
– £500 tax-free
– £4,500 taxed at 33.75% = £1,518.75 in dividend tax
Reporting and Paying Dividend Tax
No changes here! If your dividend income is over £10,000, you’ll still need to file a Self Assessment tax return. HMRC will expect you to report your dividend income and pay any tax owed by January 31st following the end of the tax year.
For those with dividend income under £10,000, HMRC might adjust your tax code to collect the tax due. As always, keep an eye out for any correspondence from them.
The Key Takeaways
Let’s recap:
1. The Dividend Allowance is falling to £500 in 2024/25
2. Tax rates remain the same for all tax bands
3. Don’t forget to report your dividends and pay any tax owed on time
Start thinking ahead to minimise your dividend tax liabilities and keep more of your hard-earned money. 💸
