ARTICLE · 27 AUGUST 2015

Weekly Tax Update - August 24, 2015

Smith & Williamson

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HMRC has issued a factsheet explaining that the proposed 'dividend allowance' will not exclude up to £5,000 of dividend income from taxation, but be applied as a zero- rate of tax on the first tranche of dividend income.

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1 PRIVATE CLIENT

1.1 Dividend allowance update

HMRC has issued a factsheet explaining that the proposed 'dividend allowance' will not exclude up to £5,000 of dividend income from taxation, but be applied as a zero- rate of tax on the first tranche of dividend income.

Crucially, dividend income will continue to be taxed as the top slice of income but with the first £5,000 taxed at 0%. The zero-rated dividend income will remain 'taxable' income so will still need to be taken into account when considering how tax bands are utilised as well as allowances and charges based on total income.

Example

Take the position for someone in 2016/17 with non-dividend income of £40,000, receiving dividends of £9,000 outside of an ISA. The personal allowance is £11,000 and basic rate band £32,000.

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