The ‘low salary high dividend’ approach has finally come to an end & while there are still many advantages to operating as a limited company no doubt a revised approach will be required from April 2016; the move appears to have received little media coverage and while it was always on the cards it is surprising that the changes have not been phased in as this is quite a significant change in tax policy & will result in significant tax increases for many small business owners supposedly the ‘life blood of the economy’.
Proposed changes: the main details:
From 1 April 2016 notional 10% tax credit abolished
New £5,000 tax free dividend allowance
Dividends above this level taxed at 7.5% (basic rate), 32.5% (higher rate), & 38.1%
- Dividends received by ISAs & pension schemes unaffected