The tax that you pay on dividends can vary from year to year depending on the financial climate that we find ourselves surrounded by here in the UK. In the latest budget announcement, Rishi Sunak announced new changes to the tax rates for dividends. Today we are going to look at the 2021 dividend rates so you know how much you can be taking out of your Limited business and how much it will cost you.
It’s important to note that these 2021 dividend rates will only affect you if you run a Limited company. If you run a company that is under any other structure you won’t be able to pay yourself through dividends. However, if you have a Limited company, with approval from the other directors in your company you can sign off and pay yourself through dividends which can sometimes be the most tax-efficient way of paying yourself
In the latest budget announcement, the Chancellor did confirm that the tax-free dividend allowance will remain at £2,000. Meaning you can take up to this amount out of your Limited business without being taxed.
The basic 2021 rate for dividends has changed. From last year where you would pay 7.5% on anything up to £37,500. This amount has now increased up to a maximum of £49,999.
This has also had a knock-on effect on the dividend high rate. Which was 32.5% of the amount from £37,501 to £150,000. This is now on amounts ranging from between £50,000 to £99,999.
Finally, there has also been a change to the dividend additional rate. Which was 38.1% of anything over £150,001 but this has now changed to any dividends over £100,000.
If you want to know more about dividends and paying yourself dividends if you run your own Limited company then get in touch. Here at D&K Accounting, we are a team of Profit First professionals with experience in helping businesses across the country look after their books and maximise their profit potential.