From 6 April 2016, dividends of up to £5,000 can be received tax free. Whilst this may appear good news, this allowance is introduced at the same time as a 7.5% tax increase for all dividends not falling within the £5,000 limit.

As a result of the impending rate increase, you may wish to consider accelerating dividend payments to before 6 April 2016, so that they are taxed at lower existing rates. In particular, individuals who are able to receive dividends this tax year, which fall within their lower rate tax band of £42,385, have a short window of opportunity to receive such dividends at an effective 0% income tax.

If you wish to discuss this, or would like wider advice with regard to profit extraction then please contact Andrew Wilson, Partner on 01788 539000.