{"id":27207,"date":"2024-09-12T10:36:53","date_gmt":"2024-09-12T09:36:53","guid":{"rendered":"https:\/\/smh.group\/?p=27207"},"modified":"2024-09-12T10:39:14","modified_gmt":"2024-09-12T09:39:14","slug":"dividend-allowance-cut-to-500","status":"publish","type":"post","link":"https:\/\/devstagesite.co.uk\/smhgroup\/dividend-allowance-cut-to-500\/","title":{"rendered":"Dividend allowance cut to \u00a3500"},"content":{"rendered":"<p><strong>With the dividend allowance now reduced to just \u00a3500, the number of taxpayers paying tax on dividend income in 2024\/25 is expected to double compared to three years ago.<\/strong><\/p>\n<p>Initially set at \u00a32,000, the allowance was cut to \u00a31,000 for 2023\/24 and further reduced to \u00a3500 for 2024\/25. This change significantly impacts basic rate taxpayers, with nearly 700,000 paying tax on dividend income in 2022\/23\u2014a figure set to rise to almost 1.7 million this year.<\/p>\n<p><strong>Tax liability<\/strong><\/p>\n<p>A modest share portfolio of just over \u00a310,000 yielding 5% will now use up the dividend allowance, leaving the investor with a tax liability notifiable to HMRC. Consider this:<\/p>\n<ul>\n<li>Notification requires either contacting the HMRC helpline, asking HMRC to collect tax through a tax coding change (if employed), or completing a self-assessment tax return.<\/li>\n<li>With a basic rate of 8.75% on dividend income, the amount of tax due will often be frustratingly low given the inconvenience involved.<\/li>\n<\/ul>\n<p>The average amount of tax due from basic rate taxpayers is estimated to be \u00a3385 for the current tax year; down from \u00a3780 three years ago.<\/p>\n<p>Even worse will be where an investor opts for script dividends. These are still taxable despite no cash being received, so tax will have to be funded from other sources.<\/p>\n<p>At the same time as the dividend allowance has been cut, the level of dividend payouts by companies has generally recovered to pre-Covid levels.<\/p>\n<p><strong>Mitigation<\/strong><\/p>\n<p>If dividend income exceeds the \u00a3500 allowance, some mitigating steps might be possible. The obvious move is to make full use of Independent Savings Account allowances for some current, and all future, share investments. Another approach would be to invest for capital growth rather than dividend income. Making use of the dividend allowance of a spouse, partner or an adult child by spreading a share portfolio across the family is another possibility.<\/p>\n<p>HMRC\u2019s guide to tax on dividends can be found <a href=\"https:\/\/www.gov.uk\/tax-on-dividends\">here<\/a>.<\/p>\n<p>For more information,\u00a0<a href=\"https:\/\/devstagesite.co.uk\/smhgroup\/contact\/\">contact us<\/a>\u00a0on\u00a0<strong>0114 266 4432<\/strong>\u00a0or email\u00a0<a href=\"mailto:info@smh.group\"><strong>info@smh.group.<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>With the dividend allowance now reduced to just \u00a3500, the number of taxpayers paying tax on dividend income in 2024\/25 is expected to double compared to three years ago.<\/p>\n","protected":false},"author":4,"featured_media":27208,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[3],"tags":[988,19],"class_list":["post-27207","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-smh-accounting-business-advisory","tag-dividend-allowance","tag-tax"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - 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