Chancellor announced dividend tax hike from April 2016

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Most small Ltd Co owners with low salary high dividend income extraction will see a hefty personal tax hike.

Ignoring £5k tax free allowance, dividend tax rate will increase by 7.5% across all income levels.

MVL Online has outlined some of the proposed changes in the article below.

 

 

 

Proposed changes:

- Scrapping 10% notional tax credit

- Instead £5,000 dividends tax free, then

- Dividends taxed at 7.5% for basic rate taxpayers, 32.5% for higher rate and 38.1% for additional rate

How much has it changed:

- Basic rate has changed from 0% to 7.5%

- Higher rate has changed from 25% to 32.5%

- Additional rate has changed from 30.6% to 38.1%

There seems no easy way to avoid this for an ongoing business, other than simply taking less money out now or accepting the higher personal tax.

Alternatively, if you’ve got a company with lots of cash and you’re perhaps considering doing something else, it’s worth looking at the option of a solvent liquidation.

Source: Research

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