Tricky, but the Chancellor has found a way! Amongst all the headlines about benefit cuts and the living wage you might have missed a little announcement in the recent Budget about the abolition of the dividend tax credit, but this will mean that a lot of people will be paying tax on income that was previously tax-free.
Who is affected? Owners of businesses that operate as a limited company and pay themselves by way of dividends, and anyone who receives more than £5000 in dividend income, which will mean those with a share portfolio worth about £150,000 or more.
What will it mean? Those in receipt of dividends of more than £5000 will pay an extra 7.5% tax compared to now. For company owners there will be a small reduction in Corporation Tax rates in the future but this is very unlikely to compensate for this increase.
When does this start? The new rules start in April 2016 at the start of the new tax year.
What should I do now? If you think this change will affect you please contact us so that we can calculate what it will mean for you and discuss any changes you need to make.
Probusiness Accountants Ltd
Call on 01749 677989