Changes to tax on dividends, effective from 6 April 2016, are having a surprising effect on 2016/17 PAYE codes. Dividends falling outside the new £5,000 dividend allowance will be taxed at 7.5%, 32.5% and 38.1 % depending on the individual's level of income, leading to an increased tax liability for many company owners and directors. This additional tax on dividend income would normally be collected through the self assessment system and be payable by 31 January the following year. However, affected taxpayers are instead seeing a deduction in their coding notices for the 2016/17 tax year. This deduction is referred to as 'dividend tax' but is not in fact tax. It is an amount of coding deduction estimated at a level to collect the appropriate amount of tax on the dividend income by deducting basic rate, higher rate or additional rate tax from payroll income.
展开▼
