This is the first year that the Dividend Tax will need to be taken into account on your tax return – you might remember all about this if you attended our special seminar on the subject back in 2016 (if not, you can catch up with our seminar videos online).
If the issue of being more stringently taxed on your dividends has slipped your mind, you might not have been putting aside money to meet your extra tax obligation.
This is one reason why we’re strongly advising all our clients who pay themselves dividends from their business or receive dividends from elsewhere to get their tax return information to us as soon as possible. The sooner you know what tax you will owe, the sooner you can ensure you have the available cash to pay it.
The first payment of dividend tax will be due on 31/1/18. And if your personal tax liability for 2016/17 is greater than £1,000 then a payment on account is due on 31/1/18 too.
Not convinced that you should worry about this yet? Here’s an example from a client who was surprised at the amount of tax he owes thanks to the Dividend Tax. You can see the difference it has made between last year’s tax obligation and this:
On a sole Director Shareholder the personal tax return for the last two years read as follows for one client this week:
|Year ending:||5th April 2017||5th April 2016|
|Total taxable income||£40,052||£39,100|
|Personal tax due on 31st January||£2,705.85||£0|
That’s £2,705.85 that they have had to find by January that they weren’t expecting to with a further £901.95 due in July! AND they have an additional £510 in corporation tax to pay following the decrease in salary due to the removal of the Employment Allowance Scheme.
It’s lucky for them that they got their tax return sorted nice and early – they have time to put the extra money to one side so that they can pay their bill. So, please – for your sake as well as ours – don’t leave your tax return to the last minute.
Get your paperwork to us as soon as possible – you can download our useful Self Assessment tax return checklist here.