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October 27th 2021

Autumn Budget 2021: personal tax measures

The rates of Income Tax applicable to dividend income will increase by 1.25%. The dividend ordinary rate will be set at 8.75%, the dividend upper rate will be set at 33.75% and the dividend additional rate will be set at 39.35%. The dividend trust rate will also increase to 39.35% to remain in line with the dividend additional rate.

The changes will apply UK-wide and will take effect from 6 April 2022.

Since April 2016, the rates of Income Tax applicable to dividend income have been 7.5%, 32.5% and 38.1% for basic, higher and additional rate taxpayers respectively. Any individual who has dividend income can benefit from the dividend allowance which has been set at £2,000 since April 2018. Dividends within the allowance are not charged to tax and this will remain the case.

Legislation will be introduced in Finance Bill 2021-22 to change sections 8 and 9 of the Income Tax Act 2007 to increase the rates of tax applicable to dividend income including the dividend trust rate. This will also have the effect of raising the rate of tax charged under section 455, Corporation Tax Act 2010 on loans to participators (commonly known as "section 455 tax") and on personal representatives that are liable to tax on dividends paid into estates of deceased persons under section 14 of the Income Tax Act 2007.

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