Summer Budget – Increase in Income Tax on Dividends

9th July 2015

Summer Budget – Increase in Income Tax on Dividends


You won’t have seen much mention of the increase in income tax on dividends in the press coverage of the Summer Budget, but this change is actually one of the largest tax hikes for owner managed businesses for many years. 

It is hard to find a business of any reasonable size that does not operate as a limited company from which the owners take most of their drawings as dividends and those drawings are going to be taxed at an additional 7.5% from April 2016. 

Business owners are going to have to plan ahead for this additional tax, which they won’t have to start paying to HMRC until January 2018 – many people whose earnings are within the basic rate band will not have been paying any income tax but will now be faced with self-assessment tax for the first time. 

Consideration will need to be given to paying larger dividends than usual before 5 April 2016 – this will bring forward the date for payment of tax on those dividends, but save the additional 7.5%. 

For more information, please do not hesitate to contact the team at Plus Accounting on 01273 701200 or 


Written by Peter Hedgethorne, Director at Plus Accounting, Chartered Accountants

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