5 tips covering 'more tax to pay on your January dividends'
Back in the good days, being a basic rate tax payer enabled you to take out £30k from your company tax free each year. Inevitably HMRC changed the rules on taking dividends with new rates. The 10% notional tax credit was removed and replaced with a £5k tax free dividend, further dropping to £2k tax free within two years.
If you are a higher rate taxpayer and received £22,000 of dividends in 2018/19 only £2,000 of those dividends are tax free now leaving £20,000 of those dividends to be taxed at 32.5% meaning £6,500 due on 31 January 2020, and possibly payments on account of your 2020/21 liability.
This radical change kicked in from 6 April 2016…. for many taxpayers that meant more tax to pay on dividends on 31 January each year so we have prepared;
5 tips on paying your January taxes:
Find out what documents are needed
This will help you define the timescales to get what you need
Prepare documents to complete your tax return
Collect as much as you can and have questions to the ready
Make a timeline of what is due and when
You can work out if you can meet your upcoming deadlines
Present your documents to your advisor as soon as you can.
The sooner the advisor has it - the sooner you know what’s what and whether you can get some planning ideas to reduce your tax liabilities.
Set aside time to prepare sufficient funds
Identify any potential cash flow issues and research solutions