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Sunday
May162010

New Tax Rate Means Dividends Are Paid Earlier Than Usual

Shareholders with lots of UK companies have had an earlier windfall than they were expecting this year.  This is due to the increase of the tax rate to 50% for higher income earners bringing in more than £150,000 a year.

According to the reports and data I have read recently, if the dividend payments were to have been paid at the usual time, many investors would have been hit by the new 50% rate as a result.  But because companies have chosen to pay the dividends early they have saved these investors from having to shell out the additional money this time around.

More than forty companies chose to take this route.  Shareholders received more than £880 million pounds as a result of the early payment.  But while this has led many to escape the additional tax that would otherwise have been payable, it has not solved the problem of the additional tax they will pay in years to come.

Some may hope that we will get a change in government that will reverse the 50% tax rule.  But this is uncertain at the moment – both because of the policies of the main parties and also because of the uncertainty surrounding the possibility of a hung parliament.

The amount of dividends that were issued this year so far have only dropped very slightly since last year.  But while many shareholders have escaped the higher rate of tax this time around, they will not be able to do so in future.  As such, many believe that Labour’s new tax rate will lead to more people leaving to live and work in other countries.

If you want advice on the amount of tax you are currently paying, you can get impartial advice from us here at St Matthew.  Use the contact details on this website to get in touch now.

 



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