Important information for Limited company directors & those in receipt of dividend income - changes from April 2016

Removal of the Employment Allowance for Director only Ltd Companies

From April 2016 companies with no other employees other than company directors will not be eligible to claim the £3,000 Employment Allowance against employer's National Insurance contributions.  

As a result of this change, once directors' salaries reach the lower threshold of £8,060, they will be subject to employees NI of 12% PLUS employer's NI of 13.8% on any salary over this amount. 


 

Removal of Dividend Tax Credit

 
The old Dividend Tax Credit is being replaced by the new tax free Dividend Allowance, this gives you the first £5,000 of your dividend income TAX FREE.

This allowance is available to anyone who has dividend income. This means that you won't have to pay tax on the first £5,000 of your dividend income, no matter what other non-dividend income that you may have.  You will pay tax on any dividend income that you receive over £5,000 at the following rates: 

• 7.5% on dividend income within the Basic rate (20%) tax band.
• 32.5% on dividend income within the Higher rate (40%) tax band.
• 38.1% on dividend income in the Additional Rate (45%) tax band. 

If you feel that any of the above issues may affect your business, please get in touch.