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New dividend allowance

26 August 2015
Issue: 4515 / Categories: News , Investments

An HMRC factsheet has been published on the new tax-free dividend allowance.

The government has issued a factsheet outlining how the new tax-free dividend allowance will operate when it comes into force on 6 April 2016. The new rules ensure that tax will not be payable on the first £5 000 of the dividend income and applies irrespective of any non-dividend income earned.
 
From April 2016 new rates will also be introduced on dividend income over £5 000 as follows:
 
  • 7.5% on dividend income within the basic rate band;
  • 32.5% on dividend income within the higher rate band; and
  • 38.1% on dividend income within the additional rate band.
 
The factsheet provides examples of six circumstances showing how the allowance would work in practice. HMRC claim that only those with significant dividend income will pay more tax...

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