Dividend nil-rate

An outline of the changes to the rules regarding dividends.

Blue Spire can help taxpayers in the Brighton 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

Blue Spire can advise businesses in the Brighton area on a range of tax issues relating to dividends. Please contact us for more information.

29 Jul 2021

ICAEW urges HMRC to scrap exemptions to simplify VAT rules

In response to HMRC's consultation on simplifying the rules relating to land and property, the Institute of Chartered Accountants in England and Wales (ICAEW) has urged HMRC to abolish all VAT exemptions and remove all VAT options.

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Dividend nil-rate

Example 1

Example 2

ICAEW urges HMRC to scrap exemptions to simplify VAT rules

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