Business Owners: Remodel Your Future Income or Lose Out

Posted by siteadmin on Monday 29th of February 2016.

Small shareholders, whose annual dividend amounts to £5,000 or less, have nothing to fear from the Chancellor’s dividend tax rate changes. However, business owners who pay themselves a minimum salary and top up their income with dividends will need to remodel how they pay themselves.

The tax-efficient options vary with circumstance and can be complex – Scottsdale MoneyWISE has specialist software that enables you to understand and compare potential outcomes. Please contact us if you’d like to use it to review your options.

If you’re unaware of what the Chancellor intends to do, here’s an outline of the new tax regime, which starts in April 2016:

  • Under the new regime, the first £5,000 of dividends awarded each year will be tax-free
  • The personal allowance will be £11,000
  • 7.5% tax on dividend income below £32,000
  • 32.5% tax on dividend income between £32,001 and £43,000
  • 38.1% tax on dividend income exceeding £43,000.

Dividends paid directly into pension funds and Individual Savings Accounts (ISAs) will continue to be tax-free.

Tax planning is not regulated by the Financial Conduct Authority