Companies pay dividends early to beat tax rises

Companies are rushing to pay their shareholders special dividends before April, ahead of rises in income tax rates for higher earners.

Income tax for those earning more than £150,000 will rise to 50 per cent on April 6, while high earners will be forced to pay 42.5 per cent tax on dividend income, up from 32.5 per cent, according to accountants Wilkins Kennedy.

UK companies such as Hargreaves Lansdown, the financial advisory group, and Rathbone Brothers have said they will pay special dividends ahead of this April 6 deadline. Other companies such as Moneysupermarket.com could also bring their dividend payment date forward from April to March this year.

Mathew Hall, head of tax for Wilkins Kennedy, said: “More and more companies are receiving requests from their shareholders to make one-off early payments of dividends. Those shareholders who do receive a pay out could find themselves saving thousands of pounds come April.

Mr Hall said this is a this is a “simple, straightforward and legitimate tactic which, if done correctly, the taxman could have no issue with”.

He said Wilkins Kennedy has seen a dramatic spike in companies wanting to execute special dividends in recent weeks.