UnaVida | Taxation of Dividends

Taxation of Dividends

Taxation of Dividends – You may be aware of the changes to Taxation of Dividends announced by the Chancellor in his recent budget. If so have you made any changes to the structure of your investment portfolios? If not, then maybe you should!

From April 2016 – the notional 10% tax credit is being on dividends is being scrapped and instead a new £5,000 tax free divided allowance s being introduced. Any dividends over the £5,000 will be taxed at 7.5% for basic rate taxpayers, 32.5% for higher rate tax payers, and 38.1% for additional rate tax payers.

The idea behind these changes is to ensure that ordinary investors with smaller portfolios and modest income will either pay less tax or the same as they are now (depending on the level of dividend paid).

The Chancellor hopes to raise an additional £2.5Bn of increased revenue from the changes announced.

Our View

You may hold a mix of investments; some may be geared for income, other investments for capital growth.

It would seem sensible re-arrange your investment portfolios’ so that your income base investments are held in your ISA or Pension ahead of April 2016.

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A pension is a long-term investment that typically cannot be accessed until age 55 (57 from April 2028). The level of pension benefits offered could change depending on the value of your investments (and any income they may generate).

The interest rates in effect at the time you begin receiving benefits may also have an impact on your pension income. The tax consequences of pension withdrawals will depend on your unique situation. In later Finance Acts, tax rates, tax bases, and tax relief may change.

The opinions expressed by Ray Best are meant to inform and educate. Before making any investment decisions always take advice that is pertinent to your investment personality and financial situation.

You are aware that past performance will not necessarily be repeated in the future, but you should be aware that persistent poor performance invariably will.

The value of an investment and the income from it could go down as well as up.

The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

UnaVida Wealth Management Ltd. is directly authorised and regulated by the Financial Conduct Authority (440577).

The guidance in this website is primarily aimed at a UK audience and is subject to regulation by the Financial Conduct Authority (FCA).

The Financial Conduct Authority does not regulate tax planning, estate planning, or wills and any form of legal documentation.