Key dividend dates you should be aware of
6 April 2016 saw the introduction of the new dividend tax. Whilst this was a major change that affected almost all of the UK’s contractors, it won’t be until they submit their tax returns before they really feel the effects of the extra tax.
So what can you do to ensure you’re prepared for when it’s due? In this blog our Director of Operations, Laura Hepworth outlines the key dates, along with advice and support every contractor needs.
A brief overview of the dividend tax hike
The previous system for taxing dividends was changed on 6 April 2016 and, whilst the first £5,000 are tax free the remainder are taxed at 7.5% for dividends within the basic tax band, 32.5% for higher and 38.1% for additional bands.
So for example, if a contractor is earning £80,000 per year they can expect to pay £4,000 more in tax compared with what they would have paid on the previous system. If you’re confused about how often you should take dividends and when they are taxed, take a look at our blog.
Alternatively, to get a real-time estimate for how much you’ll pay in dividend tax for 2016/17, use our free dividend calculator.
Key dividend dates for your diary
5 April 2017: The last day that a dividend can be declared as payable to be counted within the 2016/17 tax year.
Top tip: Make sure you have declared dividends of at least £5,000, and if your total income does not exceed the basic rate band consider declaring a further dividend.
6 April 2017: The first day that a dividend can be declared as payable to be counted in the later tax year.
31 January 2018: The due date for tax due on dividends received in the year from 6 April 2016 to 5 April 2017.
Top tip: You should set aside the dividend tax whenever you pay a dividend, to make sure you have the funds available when the tax is due. If you’re an Intouch client, your Personal Accountant will be able to advise you on this, based on your own circumstances.
31 January 2018 and 31 July – Payment on Account (POA): The due dates for payments on account. A POA is a payment towards the total amount of tax owed within the tax year. It is based on your income for the previous year. If you have taken dividends in 2016/17 it will be assumed you take the same dividends in 2017/18 and you will have to make payments on account to cover the tax due.
Top tip: If budgeting is something you struggle with, then enlisting the services of an expert contractor accountant is something you should seriously be considering.
With our all inclusive monthly service, you get expert tailored advice and support that’s unique to your personal and professional goals. Speak to us today about how we can help you plan and prepare your dividend tax payments.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.