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Will your income be cut by the new dividend tax?

The government claims this means ordinary investors with smaller portfolios and modest dividend income will see no change in their tax liability. According to its sums, when combined with the increases the government has made to the personal allowance and the introduction of the Personal Savings Allowance, from April 2016 individuals will be able to receive up to £17,000 of income per annum tax-free. 

Clearly that is the Governments spin on what could happen but for the majority of people over here the income they get comes from savings, investments or a pension.  So here’s the rub, the new rules will cut an additional £2.5billion out of investor’s income through tax.

At the moment basic-rate tax payers are not required to pay tax on dividends. 

But under the new rules that will change. From April 2016 all taxpayers will have a new tax-free dividend allowance of £5,000 a year. After this tax is to be charged at new rates that are 7.5 per cent higher than current levels. The overall tax rate will depend on your income tax rate band.   

If you are affected in some way by the changes outlined above, or have any questions regarding how to make the most of your money, it is well worth sparing some time to see a Financial Adviser.

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