Dividend taxes to be changed
This could be a big one!! Until more details are released we won’t know the impact it will have on how small business owners remunerate themselves.
The usual dividend tax credit, which means there is usually no additional tax to pay if you are a basic rate tax payer, will be replaced by new £5,000 tax-free dividend allowance. The tax rates on dividend is also set to be increased! It appears the governments plan is to tax those with “significant dividend income” more, although it is unclear what will be deemed as significant? Those with modest (I presume less than £5,000) will see no change or a cut in the tax paid.
As soon as we have more information on this we will post another blog.
More details on the above dividends tax changes are available and it looks as though dividends within the basic rate band will attract a 7.5% tax liability!! This means if you take around £28,000 of dividends per year and a £10,600 salary you tax bill will go from around £0 to around £2,000!!! That is a huge increase, not so good for small businesses!! When the finer details are known we’ll let you know.
Hooray!! Corporation tax is set to be cut by 2% by 2020, down to 19% in 2017 and 18% in 2020. This seems to be a good thing, but I’ll reserve judgement until we see how the dividends tax is going to be changed – it may well be six of one, half a dozen of the other! Looks like this is a small token to owner managed businesses to compensate for the increase in the dividends tax increases above. Read more