From April 2016, the Tax Credit will be abolished and replaced with a £5,000 tax-free Dividend Allowance. The new Dividend Allowance means that individuals will not have to pay tax on the first £5,000 of dividend income they receive.
Above this there will be liability to income tax at the following rates:
Basic rate tax payers 7.5%
Higher rate tax payers 32.5%
Additional rate tax payers 38.1%
What if my dividend income exceeds £5,000?
Companies that pay dividends will not inform HMRC if you go over your allowance. If your dividends are between £5,000 and £10,000, you will need to inform HMRC or apply for self-assessment. If your dividends exceed £10,000 you will be required to complete a self-assessment tax return.