Non-motoring > Income tax, dividend allowance. Miscellaneous
Thread Author: bathtub tom Replies: 2

 Income tax, dividend allowance. - bathtub tom
Just received a notification that I'll be paying more tax due to interest income. I see there appears to be a £2k/year tax free dividend allowance. I'm not earning that in share dividends. Is this correct? If so, anyone recommend a safe investment to take advantage?
 Income tax, dividend allowance. - Lygonos
I think it is down to £1000 this tax year, and again to £500 in 2024/25 for dividend income.
 Income tax, dividend allowance. - Terry
The tax free dividend allowance is reducing as Tom notes.

But taxation of dividends received is much lower than for salary - basic rate 8.75%, higher rate 33.75% and for top earners 39.35%.

I think the logic for this is that the company paying the dividends has already paid corporation tax on the profits made before the dividend is paid. Thus to tax dividends at the full rate paid on salary would have the effect of taxing the same profit twice.

You may recall during the pandemic that many self employed company directors did not get the financial support that those in normally paid employment did - furlough payments etc.

This is largely because they took advantage of this legislation to minimise their tax burden by drawing dividends rather than salary.
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