Tax free dividends to reduce to £1,000 in the UK from 2023/24

/in /by

If you’re an investor in the UK, you may have heard about the upcoming change to the dividend nil rate band. From April 6th, 2023, the dividend nil rate band will be reduced from £2,000 to just £1,000. This means that any dividends received above £1,000 will now be subject to taxation.

This change may have a significant impact on the tax liabilities of individuals who rely on dividends as a source of income. Here’s what you need to know about the upcoming change, and how it might affect you.

What is the dividend nil rate band?

The dividend nil rate band is a tax allowance that allows individuals to receive a certain amount of dividend income tax-free. Prior to April 6th, 2018, the dividend nil rate band was set at £5,000. However, as of April 6th, 2018, the dividend nil rate band was reduced to £2,000. And from April 6th, 2023, it will be further reduced to just £1,000.

This means that individuals can now only receive up to £1,000 in dividend income each year without paying tax on it. Any dividend income received above £1,000 will be taxed at the appropriate rate.

Why has the dividend nil rate band been reduced?

The reduction in the dividend nil rate band was announced by the UK government as part of its ongoing efforts to raise revenue. The government estimates that the change will affect around 1.25 million individuals, and will raise approximately £830 million in revenue over the next four years.

The government has stated that the reduction in the dividend nil rate band is aimed at ensuring that individuals who receive significant dividend income pay their fair share of tax. The change is also intended to discourage individuals from using dividend income as a way of avoiding tax on their salary or other income.

How will the reduction in the dividend nil rate band affect me?

The impact of the reduction in the dividend nil rate band will depend on your individual circumstances. If you receive dividend income of less than £1,000 per year, then the change will not affect you at all.

However, if you receive dividend income of more than £1,000 per year, then you will now be subject to tax on the amount above the new threshold. The amount of tax you will need to pay will depend on your income tax bracket.

For basic rate taxpayers, dividends will be taxed at a rate of 8.75% above the £1,000 threshold. For higher rate taxpayers, dividends will be taxed at a rate of 33.75% above the £1,000 threshold. For additional rate taxpayers, dividends will be taxed at a rate of 39.35% above the £1,000 threshold.

What can I do to minimise the impact of the reduction in the dividend nil rate band?

If you’re concerned about the impact of the reduction in the dividend nil rate band on your tax liabilities, there are a number of steps you can take to minimise its impact. Here are a few examples:

  1. Consider investing in tax-efficient vehicles, such as ISAs, which can provide tax-free income and gains.
  2. Consider spreading your investments across different companies and sectors to reduce your exposure to any one dividend-paying stock.
  3. Consider speaking to a financial advisor or tax professional to discuss your options and develop a strategy that is tailored to your individual circumstances.

In conclusion, the upcoming reduction in the dividend nil rate band is set to have a significant impact on the tax liabilities of investors who rely on dividends as a source of income.

What are Benefits In Kind?

/in , /by

One of the most common questions we get asked is “what is a benefit in kind?”

Benefits in Kind” are non cash ways of rewarding employees and directors. The key thing is that they are not cash.

We are talking about benefits such as medical insurance, company cars, gym membership and private use of company assets.

However, just because they are not cash that does not mean they are tax free. They can be tax efficient for both the company and the employee (such as new electric cars) or can have pretty poor tax implications (such as if a company pays for your private petrol).

To find out how best to use BIKs, get in touch. 0203 151 2354 or email sharon@allianceca.co.uk

Increase in corporation tax expected

/in , /by

The chancellor is expected to announce a rise in corporation tax from 19% to 23% at the next budget.

Clearly the government has to raise money to pay for the furlough scheme, but is this the right way to do it?

SME companies have been going through a tricky time as it is already, and now profits will be squeezed further going forward.

If you want to discuss how this will impact your business, give us a call on 0203 151 2354.

AllianceCA – keeping the taxman away

 

Grants for small businesses

/in , , /by

Are you aware of all the grants and funding that are available for small businesses like yours?

At times like these it’s worth looking at all the grants that you may be eligible for. And there are a number of ways you can see what’s out there.

For instance, you could hire a external consultant to help you. Alternatively, you could go to one of the excellent third party websites out there like www.moneysavingexpert.com and see what they have for you there.

Sometimes the best answers are the simplest – you can find all grants on the government’s own website, specifically at Finance and support for your business – GOV.UK (www.gov.uk)

So if you have some free time in the lead up to Xmas and the new year (and given that lots of shops are closed and we can’t visit family and friends), take a look and see what funding is out there, and whether it has your name on it.

AllianceCA are there to help clients apply for funding and grants. Firstly, we can provide support in the form of business plans, cashflow forecasts and any other ad hoc financial analysis that you need. Secondly, we have experience of supporting funding applications from everything from bounce back loan to VC funding.

At times like these, funding for small businesses is key to helping SMEs survive 2020 and thrive in 2021.

If you’d like to find out more then get in touch with us here London Accountant | Chartered Accountant London | AllianceCA

 

Want to find out why it’s a good time to buy a house?

/in , , /by

As part of the ongoing support during the COVID-19 crisis, the Chancellor announced a temporary reduction to Stamp Duty Land Tax (SDLT) on residential property in England and Northern Ireland. Want to know the details? Then read on…⁠
⁠
The new measures apply from 8 July 2020 until 31 March 2021.⁠
⁠
The current Residential SDLT threshold of £125,000 will rise to £500,000. This means that taxpayers who do not already own a residential property will pay no SDLT if they purchase a house for £500,000 or less.⁠
⁠
The residential property Higher Rate of SDLT will be reduced to 3% for buyers of second properties costing up between £125,001 and £500,000.⁠
⁠
The higher rate applies to residential property purchases made by companies as well as individuals.⁠
⁠
With mortgage rates at record lows, and now this reduction in stamp duty, its a great time to get on the property ladder. ⁠
⁠
At AllianceCA we love speaking about property tax – give us a call if you would like to discuss it too. ⁠
⁠
#HMRC #stampduty #AllianceCA #tax #charteredaccountants

Working from home expenses

/in , /by

You are running a business and are working from home, so you are incurring extra expenses.

These expenses need to be included in your business’ tax returns so that you pay less tax.

HMRC has increased the flat rate allowance so employees can now claim £6 per week – see here

Speak to an expert to find out what you can claim. You should know what working from home expenses are tax deductible – that was you will be able to keep a track of them as the year goes on.

You should speak to an accountancy firm that cares for it’s clients. At AllianceCA ⁠we speak to clients to make sure they know what is and what is not tax deductible.  ⁠

Call Sharon on 0203 151 2343 or get in touch here

AllianceCA⁠ ⁠Working from home expenses

#HMRC #workingfromhome #accountants #charteredaccountants #tax #savemoney⁠ ⁠