Non-payable dividend tax credit

Further extension for investors

There is currently a one ninth non-payable dividend tax credit available for UK individuals receiving dividends from UK resident companies. Higher rate taxpayers, who are liable to tax at 32.5 per cent, in practice pay only 25 per cent (of the net dividend) because part of the tax liability is covered by the tax credit. Basic rate taxpayers who are liable to tax at 10 per cent, in practice do not pay any tax on dividends from UK companies because the tax liability will be entirely covered by the tax credit.

Budget 2007 announced a simplification of the tax system for UK individuals with foreign shares. From April 2008 the non-payable dividend tax credit has been extended to dividends from non-UK resident companies, provided the investor owns less than a 10 per cent shareholding.

Announced in Budget 2008 from April 2009, the non-payable dividend tax credit will be further extended to investors with a 10 per cent or greater shareholding in a non-UK resident company, unless the source country does not levy a tax on corporate profits similar to corporation tax.

Levels and bases of, and reliefs from, taxation are subject to change.