Articles by Anthony Lipscombe.
With the trust tax rate expected to increase from 33% to 39% on 1 April 2024, now is the time to consider declaring dividends for any companies owned by trusts.
Declaring a dividend before 31 March 2024 means there will only be 5% “top-up” tax payable (i.e. the difference between the company tax rate of 28% and the current trust tax rate of 33%).
This represents a saving of 6% because if you wait until after 31 March, the “top-up” tax will be 11%.
To facilitate this:
• You will need to pay your 2023 terminal tax and final 2024 provisional tax payment in March 2024. (The normal due dates are 7 April and 15 May, but these are after the expected trust tax rate change.)
• Resident withholding tax equivalent to 5% of the dividend will be payable by 20 April 2024.
If you have imputation credits in a company owned by a trust, you should assess whether there is an advantage to declare a dividend before 31 March.
Declaring dividends may not be relevant for all companies, even if they have imputation credit accounts that they could clear, e.g. if the shareholders have large credit accounts. This is something your accountant needs to assess.
The most important thing is to talk to your accountant to ascertain whether is it prudent for you to declare a dividend now. This is time sensitive, so if you are a GRA client, contact us as soon as possible (latest early March) if this is relevant to you, so we have time to get the paperwork sorted before the end of the financial year.
Note: The law changing the trust tax rate has not yet been passed, but at this stage we think that it will (the new government has not given any public indication that they want to halt this law change). Naturally we are monitoring its progress closely. Following this, we are encouraging our clients to plan on the basis that it will pass and not leave this issue until the last minute when it may end up being too late to act.
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