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Dividend Allowance and Income Tax Rate Bands

Dividend Allowance and Income Tax Rate Bands
09 Mar 2017
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Dividend Allowance and Income Tax Rate Bands

Dividend Allowance

From 6 April 2018, the tax-free dividend allowance of £5,000 is to be reduced to £2,000. Director shareholders of small companies that have adopted the strategy of minimising salary and maximising dividends will likely pay more Income Tax on their dividend income because of this change.

Income Tax Rate Bands

The levels for 2017-18 are:

For 2017-18 - £45,000 (the UK apart from Scotland)

For 2017-18 - £43,000 (Scotland)

If your income before allowances exceeds these amounts you will be paying 40% Income Tax on the excess (this assumes that you are only entitled to the basic personal allowance).

The threshold at which the 45% rate starts is unchanged at £150,000.

For yet another year there were no changes to the basic Income Tax rate (20%), the higher rate (40%) and the additional rate (45%).

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