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Untaxed band for dividend income falls to £2,000.

From 6 April 2018 the level of dividend income received tax-free will be reduced from £5,000 to £2,000. The tax rates applying outside this band remain unchanged. Dividends above the £2,000 threshold will be taxed at 7.5% for basic-rate taxpayers, 32.5% for higher-rate taxpayers, and 38.1% for additional-rate taxpayers.

The reduction of the tax-free allowance means shareholders will be worse off by £225, £975 or £1,143 a year depending on whether they pay tax at the basic rate, higher rate or additional rate.

Provided the company has sufficient distributable profits, directors should consider accelerating dividend payments to before 6 April 2018 to benefit from the current dividend tax-free allowance of £5,000 before it falls.

Article from ACCA In Practice