The July 2015 Budget saw a number of unwelcome tax changes, including a new dividend tax regime which commences from April 2016. This article sets out the new changes and what can be done to mitigate the impact of the new rules.

What are dividends?
A dividend is paid from a company to its owners (shareholders) to distribute after-tax company profits - this is the way that company owners are able to receive income from a company (though they may also be employees/directors and receive a salary). Dividends can be paid AFTER a company has made a profit and paid tax on that profit (so it isn't possible for a company with no profits to pay a dividend).

While most property investors don't use a company, the new mortgage interest relief restrictions will mean that many more property investors will in future look to operate partly or mainly via a company, and so will be interested in how dividends are taxed.

Summary of changes proposed
The following changes will be effective from April 2016: