2022 Changes to Dividend Tax

Dividend Tax rates will increase from 6th April 2022, impacting many landlords who invest via limited company structures. Read our article for all the details of these changes and how they could impact your profits.

What is Dividend Tax?

Dividends are how companies share cash from trading profits with their shareholders. Just as with salaried income, dividends are taxed when you receive them.

What are the rates for Dividend Tax?

You can receive up to £2,000 in dividends per year tax-free; however, any amount beyond this is taxed according to your top “marginal” rate of income tax. As of 6th April 2022, these rates will increase by 1.25%.

Income tax band

2021-2022 dividend tax rate

2022-2023 dividend tax rate

Basic rate

7.5%

8.75%

Higher rate

32.5%

33.75%

Additional rate

38.1%

39.35%

 

How does this impact landlords?

With an increasing number of landlords now using a limited company structure for property investment, many will be paying themselves (and other shareholders) dividends from the rental profits (which will have already been subject to Corporation Tax). The change to dividend tax is part of a number of tax changes happening over the next few years. This includes the Health and Social Care Levy and Corporation Tax. For more information on these upcoming tax changes, please see our previous blog on the subject here.

As with all things tax, how much this impacts you is determined by your personal tax position, but you’ll likely see an increase in the amount of tax due. If you’re concerned or would like to know more about how these changes will impact your rental profits, please speak to a professional tax adviser.

To speak to an expert about your property investment plans, do give me, Agata Rogozinska, a call on 01732 471602 or email me, agatar@mortgagesforbusiness.co.uk, and I’ll be happy to help.

NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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