Dividend tax planning – Investment Accounts

Along with the capital gains allowance, the dividend allowance has been reduced in 2023/24 – with a further reduction planned for 2024/25. There are also tax considerations relating to savings interest.

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• Download the Annual Distribution Summary and client tax vouchers 
• Consider how assets within Investment Accounts are held (either jointly or in sole name)
   

The Annual Distribution Summary, which is available from August through our Reporting Services facility, displays all distributions for your clients’ non-tax wrapped investments for the previous tax year. This document therefore helps inform you whether clients have exceeded:

• The dividend allowance – £2,000 for the 2022/23 tax year (it has been reduced to £1,000 for 2023/24)
• The allowances for savings interest – which in 2022/23 ranged from zero to £6,000 depending on a client’s other income (the same allowances apply to 2023/24).​​​​

Client tax vouchers are also available from May – these are sent to clients directly but advisers can download and save these too.

The dividend tax is charged at rates of 8.75% (basic rate taxpayers), 33.75% (higher rate taxpayers) and 39.35% (additional rate taxpayers) while tax on interest is charged at the client’s marginal rate of income tax.Therefore, depending on their tax bands and whether allowances are expected to be exceeded in 2023/24, a married client or one in a civil partnership may wish to consider transferring unwrapped assets to their partner. This is because married couples and those in a civil partnership can transfer assets to each other without any capital gains tax being charged. Consideration should also be given to jointly-held assets, where the dividend and savings interest tax calculation is normally based on each individual owning 50% of the asset.

The Annual Distribution Summary, which is available from August through our Reporting Services facility, reports all distributions for your clients’ non-tax wrapped investments for the previous tax year. This document helps inform you whether clients exceeded either the dividend allowance or the allowances for savings interest.