Budget 2006

Taxation of Dividends

On the gross amount¹ at the rate of

• 10% for starting and basic rate taxpayers - liability covered by tax credit
  
• 32.5 % for higher rate taxpayers - equivalent to effective rate of 25% of dividend received
• 32.5 % for discretionary and accumulation and maintenance trusts - equivalent to effective rate of 25% of dividend received²

Shareholders are not entitled to repayment of tax credits

Certain distributions from real estate investment trusts will be treated as UK property income rather than dividend income from 1 January 2007

1 Dividend received plus tax credit
2 Unless, for 2005/2006, income does not exceed the trust standard rate band of £500

The figures shown here are subject to ammendment as the Finance Bill passes through Parliament.

This information has been prepared only as a topical guide to tax and personal financial matters. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material contained in this publication.