UK Dividend tax rates and thresholds for 2018/19

Category: Business News

UK Dividend tax rates and thresholds for 2018/19

As the end of the current financial tax year is fast approaching it’s a good time to think about whether you have fully maximised the amount you can withdraw from the company tax free and at the basic rate of dividend tax.

Assuming your company makes sufficient profits the total tax free amount you can withdraw, not including other sources of income and using our recommended low wage/higher dividend split, is £13,850 per financial tax year (personal allowance of £11,850 + £2,000 dividend allowance). You can take a further £32,500 of dividends, at the 7.5% dividend tax rate and before the higher rate of 32.5% is charged. This would usually breakdown as £8,424 salary for the year (£702 per month) and dividends of £37,926.

In most scenario’s it makes sense to withdraw as much money from the company at the lower tax rates rather than let any reserves build up for a future year as your circumstances can easily change, as can the tax rates and allowances.

There are certain things that will reduce or restrict this tax free allowance of £13,850 and the additional basic rate dividends of £32,500:

– You have other sources of income such as rental property, interest, dividends from shares, benefit in kind or any other taxable income.

– You only started working through your company after 6th April 2018 and have earned wages from a previous job or have another employment.

– Your company does not have sufficient profits available.

Any of these mentioned above will restrict the amount you can take out as dividends before being taxed. If you have received any of the above income or unsure of what you can take please get in touch with us in advance of the year end (5th April 2019) and we’ll be happy to help.

Important note: Final dividends MUST be paid prior to the 5th April 2019 or they will not be included in the current financial years calculations and you may lose certain allowances.

If you are a Scottish tax-payer, please be aware that your tax rates and allowances are different to the rest of the UK – if you need a bespoke illustration of this please don’t hesitate to ask.

Making Tax Digital – What You Need to Know

Making Tax Digital (MTD) for VAT is the Government’s first phase in what they believe is making tax administration more effective, efficient and easier for taxpayers.

Will it affect me?

If you are a VAT registered business with an annual turnover above the VAT threshold (currently £85,000), you will be required to keep digital records and submit VAT returns using MTD-compatible software from 1 April 2019.

The digital records, which need to be kept for at least six years, must include:

– The business name, place of business and VAT number
– The VAT account including the audit trail from the primary records to the VAT return
– Details on supplies made and received

My VAT return straddles the 1 April 2019 – how to I comply?

If your VAT quarter does not start on 1 April 2019, then the first VAT return beginning after 1 April will be the first return you need to be MTD compliant. So for example  if your VAT quarter ends on 30 April, then from 1 May 2019 onwards, your VAT returns must comply with MTD.

Will the deadlines for submissions and filings be changing too?

The deadlines for filing the VAT return and payment of VAT due will be exactly the same as they are now, they will not be changing.

Will my current spreadsheet count as a digital record?

Spreadsheets will not be classed as a digital record for MTD purposes unless they can be connected to an Application Programming Interface (API) via a bridging link to enable the transmission of information to HMRC. Specific software will be needed to submit the relevant information to HMRC.

I am VAT registered but my turnover is below compulsory registration limit, what should I do?

If your turnover is below the VAT threshold you may voluntarily join MTD for VAT if you wish, but it will not be compulsory to do. If your turnover was over the threshold and you are subscribed to MTD for VAT once 1 April 2019 passes, and it then subsequently drops below the threshold you must remain MTD compliant until you deregister from VAT.

Future plans for MTD

The Government’s plan is to role MTD out across all aspects of tax but as and when dates for compliance are announced, we will be sure to keep you informed.

How we can help

In due course MTD will impact all businesses. As accountants we are proactively ensuring we are ahead of the changes to give you the best possible advice at all times. We’re here to help you with whatever the future brings for your business so if you need any further information, please free feel to contact us.

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