Insight Associates provide outsourced accounting and Finance Director services to ambitious and growing businesses. We work as your only resource or with existing staff to give you complete financial support including monthly management accounts, high level financial advice, robust controls and financial systems, funding and business planning, payroll & compliance, VAT returns and statutory compliance.

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Wednesday, March 02, 2016

Tax Dividends and PAYE Codes


We blogged recently about changes to the taxation of dividends that come into effect in the tax year 2016/17.

Depending on your individual circumstances and that of your company you may want to consider pulling forward dividends into March 2016 that you otherwise might have taken in the 2016/17 tax year and gain a one-time advantage before the changes come into effect.

Even with the 6th April changes extracting dividends is still the most tax effective method of extracting income from a private company if you are a shareholder, but if you haven’t looked at how this change may affect you we would suggest you do so now.

Another change we have been made aware of is that HMRC are issuing PAYE codes for 2016/17 including an ‘estimate’ of the tax that may be due on your dividends for that year. In effect HMRC are attempting to collect the tax on dividends through the year rather than as part of self-assessment as currently.

If you receive a coding notice showing a ‘dividend tax’ line you may request that HMRC remove it and you will then continue to pay any additional tax on dividends through self-assessment. If you are happy to pay as you go you might want your accountant to check the calculation for you as HMRC are making this adjustment using assumptions that may not be correct.

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