The UK tax year runs from 6th April to 5th April each year. Usually, salary payments will have had all tax and NI due already deducted by the employer. With dividends no income tax is in fact deducted, but corporation tax was paid on the company profits before the dividend was distributed. Historically government has kept the corporation tax rates for small businesses roughly the same as the basic tax rate. With a trend towards lower corporation tax rates, dividend taxes are rising to compensate.
Each year self-employed, directors and higher rate tax payers complete a self-assessment tax return. Any extra personal tax owed is due on the 31st January after the end of that tax year. The first £5,000 of dividend received each year is free of tax. As a basic rate taxpayer 7.5% of the dividend should be set aside for tax. Once total personal income (salaries, pensions, dividends, etc) in any tax year exceeds the higher rate threshold, the effective amount to keep by personally for the taxman is 32.5% of any further dividends declared.We're really keen to help you plan for personal tax so you avoid nasty surprises.