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Significant tax changes came into effect on 6th April. Most people will be affected in some way or another, but contractors with their own limited company will need to be able to handle these changes.
Our blog provides top accountancy advice on what you can do to reduce the burden on your finances and plan for your future.
What are the dividend tax changes 2016?
To recap, the major changes announced in 2015 were the changes to dividend taxation in 2016 and the decrease in corporation tax in 2017. Other changes that have come into effect include an increase to the Personal Allowance and an increase to the higher rate tax threshold.
The changes to dividend taxation can be found in detail by visiting our blog on dividend tax planning for 2016/17, but here we will briefly highlight the changes and how Churchill Knight & Associates Ltd can help you understand and action the new legislation.
In summary, there is now a £5,000 tax free allowance for all shareholders of a limited company. Any dividends received above £5,000 will be taxed at the following rates:
| Dividend Tax Level | Percentage | Details |
| Basic Rate Taxpayer | 7.5% | Dividends distributed above the £5,000 tax-free allowance will be subject to a rate of 7.5% up to the basic rate threshold of £32,000, above the Personal Allowance of £11,000. |
| Higher Rate Taxpayer | 32.5% | Dividends that surpass £32,001 are subject to higher rate tax and will be taxed at 32.5%. |
How does the dividend tax change affect my limited company?
What this means for you as a director and shareholder of your own limited company is that you will pay more tax on your dividends. However, there are ways to minimise the bearing that these changes will have on your finances by using Churchill Knight & Associates UK Contractor Accountants to guide you.
While the removal of the dividend tax credit is not positive, there will be some relief in that corporation tax will be reduced by 1% from the current rate of 20%, to 19% in April 2017. This will be reduced by a further 1% in 2018.
How we can help:
In order to assist clients with tax planning in the year 2016/17, we devised a dividend tax plan that was communicated to our clients prior to the start of the new tax year on 6th April. In this plan, we provide clients with a long-term tax planning service that includes support from our dedicated Personal Tax team.
Ensuring your finances are in good health is very important, and whether you are looking to find out the best way to maximise your pay or if you want to know about the tax saving benefits of a limited company, our team can help.
If you are a client, you may contact our Personal Tax team to discuss more about the 2016/17dividend tax plan to ensure you can continue to maximise your take home pay. In short, our tax planning guide will help you maximise your take home pay by advising you not to take the maximum amount of dividends, but instead to take only what you need. You can then use other methods to withdraw funds from your business bank account. Contact our Personal Tax team today to find out more.
If you are not currently a client, but are looking for an accountant that is a step ahead of the changes, use the button below to find out more about our services, or use the request a callbackbutton and one of our team will call you back to discuss your options.
With our service, you not only benefit from the security of having a pro-active accountancy service, but you also make use of the following:
- Unlimited, free advice
- A dedicated account manager
- Qualified accountants with vast expertise
- Payroll, bookkeeping, invoicing and back office support
- Administration
- Quarterly VAT returns
- Liaising with HMRC
- An online web portal, easy to use for expenses and timesheets
- Instant access to your advised take home pay figure
Contact us today on 01707 671648 or email personaltax@churchill-knight.co.uk to discuss the 2016/17 dividend tax changes with our experts.
We're regularly adding new, helpful content
The Churchill Knight blog is regularly updated with helpful content for contractors and freelancers – especially articles that answer the most frequently asked questions about umbrella companies! Please pop back shortly to see the latest articles written by Andrew Trodden (Marketing Manager) and Clare Denison (Marketing Executive).