Do you know what the dividend tax rates are going forwards?
It wouldn’t surprise us if the answer is “no”, or “I’m not sure”. From 6 April 2022 we saw an increase in the dividend tax rates by 1.25% in line with the NHS Levy imposed on the National Insurance rates. As part of the mini-budget in September the then Chancellor, Kwasi Kwarteng, announced that the NHS Levy was being reversed with effect from 5 November 2022 however what wasn’t immediately clear was whether this was true of the additional 1.25% on the dividend tax rates.
The publications released around the mini-budget confirmed that the higher rates of dividend taxes were set to stay with no change being forecasted from 6 April 2023. In addition, no changes were announced as part of the Autumn Statement delivered by Jeremy Hunt on 17 November 2022.
Assuming that there are no further changes between now and 6 April 2023 this means that the higher dividend tax rates are set to stay. With Basic Rate Taxpayers suffering 8.75%, Higher Rate Taxpayers 33.75% and Top Rate Taxpayers 39.35%.
Despite the continued application of the higher dividend tax rates, it is also worth noting that the tax-free dividend allowance, currently £2,000, is reducing to £1,000 from 6 April 2023.
Given the confusion around dividend tax rates, we strongly recommend you seek professional advice to enable you to make informed decisions about your own circumstances.
For your peace of mind, speak with an experienced member of our tax team to discuss this issue and your wider tax considerations in more detail.
Don’t forget, you can also download our full Autumn Statement summary for a complete overview of the announced changes and their implications.
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