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Dividends are payments made to company shareholders. If you are a shareholder you would pay tax:
Tax paid on dividends is less than the tax paid on other income such as salaries. The dividend allowance for 2019/20 is £2,000, anything over this will be taxed.
Rates vary depending on your income tax band. Dividends are paid at the below rates:
Basic rate – 7.5%
Higher rate – 32.5%
Additional rate – 38.1%
So, if you are a higher rate taxpayer and received £22,000 of dividends only £2,000 of those dividends are tax-free now leaving £20,000 of those dividends to be taxed at 32.5% meaning £6,500 due on 31 January 2020, and possibly payments on account of your 2020/21 liability.
Remember tax on dividends will be due 31 January 2020. If you need assistance planning and preparing please contact us on 01295 477 250 alternatively you can email [email protected]