Raza Laghari, Director Certax Fitzrovia has put together the information in this article so that you can know all there is to know about Dividend Taxes in UK for Tax year 2019/2020. This article has updated information till its time of publication.

WHAT IS YOUR TAX FREE DIVIDEND ALLOWANCE?

There is a certain threshold, below which your dividends are not subject to tax. In effect, up to this threshold there is no difference between your gross dividends and take home dividend income. Dividend up till this threshold are call Dividend Allowance.

All tax payers are allotted this dividend allowance. It makes no difference which UK tax bracket they fall in. This means no matter at which rate they pay their dividend tax eventually, their initial threshold for tax free dividend allowance remains universal for all tax payers.

For all practical purposes, the dividend allowance is a 0% tax bracket. For tax year 2019/2020, dividend allowance is £2,000. This is same threshold as for the previous year. For Dividend earnings above £2,000, you will have to know which dividend tax bracket you fall in.

DIVIDEND TAX RATE BRACKETS:

There are three dividend tax rate brackets:

• Basic Rate- 7.5%
• Higher Rate- 32.5%
• Additional Rate- 38.1%

How you actually work tax on dividend is a bit complex. You need to know your Total Income Tax Band. Add your dividend income in your all other income to know your Tax band. You may pay tax at more than one rate. The Table Below and the following worked example can give you a better outlook

DIVIDEND TAX UK WORKED EXAMPLE:

Mr. A gets £30,000 in wages and £3,200 in Dividends for Year 2019-2020.

Mr. A’s Total Income: £30,000 + £3,200= £33,200

Income after personal Allowance: £33,200- £12,500=£20,700

This is Basic Rate Tax Band.

Therefore Mr. A will pay:

20% on £17,500=£3,500

No Tax on first £2,000 dividend

Basic Rate of 7.5% on remaining £1,200= 90

Total Tax Due is £3500+£90=£3590

HOW YOU PAY TAX ON DIVIDENDS?

Now that you know about UK tax Brackets and Dividend Tax Rates, it is important that you know how you pay dividend. All self employed individuals will use their Self Assessment Returns to declare their dividend earnings to the HMRC. In case you are earning less than £10,000 in dividends you need to contact HMRC and have your tax codes changed.

In all circumstances, Tax on Dividends is usually complicated and if you have more than one source of earnings, it is better you seek services of Professional accountant. If you need a professional accountant service in central London, you may contact Certax Fitzrovia Ltd. We are not only expert in UK dividend Tax Calculations but also excel in VAT management, Tax consultancy, bookkeeping, Self Assessment Returns and Payroll Accounting.

The post ALL THAT YOU NEED TO KNOW ABOUT UK DIVIDEND TAX appeared first on Blogs or News Offical Certax London.

The Conservatives seem to be falling good on their promise. They previously announced that the federal income tax free allowance will be increased to £12,000 by April of 2020. And judging by this year’s budget, the changes are being made towards right target.

Quite a few changes have been made to tax brackets too. While previously the higher tax rate of 40% applied to income of £45,000 and above, the threshold has been increased to £46,350 for tax year 2018/19.

And by April 2020, this threshold will be increased to £50,000. The UK Government has been set on increasing the allowances and making changes to UK tax brackets since 2010/11. This has been a significant departure from tax regime of coalition government.

A typical tax payer now saves up to £1,075 in taxes per year. Tax payers in federal tax bracket of 20% will save £70 whereas the tax payers of 40% bracket will save £340 a year after successful implementation of the new tax policy.

Reviewing back, the personal allowance has been changed significantly since 2010/11 when it was only £6,475. The higher tax rate threshold was £43,875 back then. While some tax payers  have welcomed the new tax regime, others complain of heavy tax burdens in name of other taxes.

The new budget has not made any change to income tax brackets for earnings above £150,000. The rate (45%) and the threshold will remain same. Likewise, tapered reduction of personal allowances between £100,000 to £123,000 will be intact.

The tax free amount will be diminished by £1 for ever £2 over and above 1£100,000. And those earning above £123,000 will not have luxury of personal allowance at all. While low income groups applaud the move,  The higher income band earners are not very happy.

The Reason? The new tax system puts a greater burden on high income earners. An estimate is that the top 1% high earners will have to pay 30% of the country’s entire tax. So amid mix reactions, people of UK receive the tax budget 2018/19.

If you want to know further about what are the tax brackets or what is tax due on you, you can contact Certax Fitzrovia Ltd. We provide quality tax consultancy and accounting services at affordable prices.

The post What Changes The New Budget Brings To Tax Brackets 2018/19 appeared first on Blogs or News Offical Certax London.