A Leicestershire accountancy firm, and tax advisor Carter and Co. is urging UK business owners to consider the effects on their net income of the impending 31st January 2018 payment deadline following the increase in dividend tax in the 2016/17 tax year.
The firm’s tax advice partner Neil Davis said that the new measures, first announced in the 2015 summer budget, are going to have serious consequences for anyone receiving income by means of dividends.
The new regime provides for a £5,000 a year Dividend Tax Allowance, above which basic rate taxpayers will be taxed at 7.5% whilst higher rate earners will be hit at 32.5% and then 38.1% for additional rate taxpayers.
Mr. Davis warns that in spite of business owners being advised of these changes almost a year in advance many have so far failed to review their remuneration plan to take account. The net result for them will be either reduced net income or further strain on their business/personal cash flow.
“As an example,” says Mr. Davis, “a business owner earning a modest £42,385 could be £1,978 worse off in the 2016/17 tax year compared to the previous year. Wealthier individuals will be much harder hit. Where possible, shareholdings should be spread among family members, especially where spouses were previously not shareholders.”
The firm also advises those holding share portfolios to consider transferring them into a stocks and shares ISA wrapper to make the best use of the capital gains annual exemption, which is currently £11,300.
“There is no doubt,” says Mr. Davis, “that dividends are still an advantageous way to deliver shareholder remuneration compared with salaries but careful planning is now needed to make the most of the opportunity.
Carter and Co. recommends that all business owners and passive share investors should take immediate advice from their tax advisors to minimise the impact of the changes on their net income.
Further information on business and personal taxation can be found at the Carter and Co. website www.carteraccountants.co.uk .
Release ID: 253314