IMPORTANT CHANGES FROM 6 APRIL 2016
Tax: changes to dividend taxation
You may already be aware that the Government has announced that from 6 April 2016 the Dividend Tax Credit will be replaced by a new tax-free Dividend Allowance. This will be in the form of a 0% tax rate on the first £5,000 of dividend income per year. Above that level, UK resident shareholders will pay tax at the following rates
- 7.5% on dividend income within the basic rate (20%) band;
- 32.5% on dividend income within the higher rate (40%) band; and
- 38.1% on dividend income within the additional rate (45%) band.
Dividends paid on shares held within pensions and Individual Savings Accounts (ISAs) will continue to be tax free.
Further information is available from HMRC at www.gov.uk/government/publications/dividend-allowance-factsheet/dividend-allowance-factsheet.
N.B. If you are a UK resident shareholder in McKay Securities PLC, which is a Real Estate Investment Trust (REIT), the new Dividend Allowance treatment:
WILL NOT APPLY to any Property Income Distribution (PID) which the Company normally pays by way of distribution. These will continue to be paid net of a 20% withholding tax, unless you are eligible to receive the payment gross; and
WILL ONLY APPLY to ordinary dividends (i.e. a non-PID) which the Company may decide to pay from time to time.
Remember that you have a legal obligation to keep records of any dividend payments you receive and the associated tax credits or deductions, and complete Tax Returns where required. If you require personal or specific advice, you are recommended to contact an independent tax or financial adviser who, in the UK, must be authorised by the Financial Conduct Authority.