Dividend allowance

Every individual can receive up to £5,000 of dividend income per year, taxed at 0%. It doesn’t matter what rate of tax the individual pays on their other income, the first £5,000 of dividend income will be taxed at 0%.

Current Income Tax Rate 2016-2017

Personal Allowance         Up to £11,000     0%

Basic rate            £11,001 to £43,000          20%

Higher rate         £43,001 to £150,000        40%

Additional rate  over £150,000    45%

Income Tax Relief explained briefly

If you’re self-employed, your business will have various running costs. You can deduct some of these costs to work out your taxable profit as long as they’re allowable expenses.

Example

Your turnover is £40,000, and you claim £10,000 in allowable expenses. You only pay tax on the remaining £30,000 - known as your taxable profit

office costs, e.g. stationery or phone bills

travel costs, e.g. fuel, parking, train or bus fares

clothing expenses, e.g. uniforms

staff costs, e.g. salaries or subcontractor costs

things you buy to sell on, e.g. stock or raw materials

financial costs, e.g. insurance or bank charges

costs of your business premises, e.g. heating, lighting, business rates

advertising or marketing, e.g. website costs