Cash dividends

By Tolley
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The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Cash dividends
  • Introduction
  • Cash dividends from UK resident companies
  • Using dividends in tax planning
  • Joint shareholdings
  • Dividends from shares beneficially held by a child
  • Income shifting
  • Dividends from real estate investment trusts (REITs)
  • Dividends from authorised unit trusts and open-ended investment companies (OEICs)
  • Exempt dividends

This document provides details on: dividend nil rate band; dividend tax rates; UK dividends received by residents and non-residents; Overseas dividends taxed on arising and remittance basis; Interaction with temporary non-residence rules; reporting requirements.

 

Introduction

A dividend is a distribution of profit by a company to its shareholders.

A dividend is not only a payment in cash. It can be the issue of new shares in exchange for forfeiting the right to a cash payment (a stock dividend). For more detail, see the Non-cash dividends guidance note.

This guidance note deals with cash dividends from UK resident companies. For more on dividends from overseas resident companies, see the Foreign dividends guidance note.

The taxation of dividends is discussed in the Taxation of dividend income guidance note.

Cash dividends from UK resident companies

Cash dividends paid by UK companies on or after 6 April 2016 have no dividend tax credit attached, meaning the amount received is the amount which is taxable.

FA 2016, Sch 1

The company should issue the shareholder with a dividend voucher showing the number of shares held by the shareholder, the dividend paid and the date of payment.

The amount reported in box 4 of the Main Tax Return  is the total dividends received from UK resident companies in the tax year (ie the arising basis of assessment). Dividends are reported on box 5.3 of the Short Tax Return, see the Short Tax Return guidance note.

The taxation of dividends is discussed in the Taxation of dividend income guidance note.

UK cash dividends received by non-residents (2016/17 onwards)

The tax position of non-residents in receipt of UK cash dividends is not straightforward. See the Taxation of dividend income guidance note.

Dividend tax credit (dividends arising before 6 April 2016)

Cash dividends paid by UK companies before 6 April 2016 were deemed to have been paid net of a notional 10% tax credit.

ITTOIA 2005, s 397(1)

Therefore, in order to calculate the gross amount,

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