What is a dividend?
Many director/shareholders of family companies pay themselves a small salary and take the rest of their “pay” in a dividend. With dividends being free of NIC, this would have allowed them to avoid the extra 1.25% NIC charge when it was originally introduced.
What will change?
Consequently, the Government added 1.25% to the dividend income tax rates for 2022/23.
Although the NIC increase is being abolished from 6 November 2022, the additional 1.25% will continue to be applied to dividends paid throughout 2022/23.
From 2023/24 the dividend income tax rate will however revert to 7.5% where dividends fall within an individual’s basic rate band and 32.5% for higher rate taxpayers. Note that the first £2,000 of dividends continue to be taxed at 0%.
Do you need further support with paying a dividend? We offer a wide range of services which are unique to your business. Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.
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