From 6 April 2018, the total amount of dividends that company directors and shareholders can receive tax-free will fall from £5,000 to £2,000.
This will mean shareholders will be worse off by £225, £975 or £1,143 a year depending on whether they pay tax at the basic rate, higher rate or the additional rate. For a couple who share the running of their company, this is doubled to £450, £1,950 or £2,286 depending on their tax rate.
If your company has enough reserves, and you have not taken any dividends in the current tax year 2017-18 it may be wise to draw out a dividend up to your dividend tax allowance of £5,000 before the changes come in to effect on 6 April 2018, to minimise the tax charge on dividends in 2018-19 tax year.
If you would like to discuss this further, please do not hesitate to contact us.