duck
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Post by duck on Jan 8, 2016 7:57:34 GMT
I doubt if I am the only one who is due to be hit by the dividend tax in the next year.
Back in Dec HMRC published a policy paper www.gov.uk/government/publications/income-tax-changes-to-dividend-taxation/income-tax-changes-to-dividend-taxation
I note
I suspect a lot of 'us' are already in Self Assessment (for various reasons) but I thought that this new lower amount worth flagging up (there is a £5000 allowance so below that no tax is due)
A bit of tax planning might be appropriate. My current understanding is that in calculating the tax band into which any dividend income over the £5,000 allowance falls, savings and dividend income are treated as the highest part of an individual's income. Where an individual has both savings and dividend income, the dividend income is treated as the top slice.
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pikestaff
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Post by pikestaff on Jan 8, 2016 9:18:52 GMT
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duck
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Post by duck on Jan 8, 2016 10:14:05 GMT
Thanks for the links pikestaff, a little reading for later!
You are right this is exactly who the target audience is, I happen to be one of them. In reality the government has realised that IR35 has failed to raise significant amounts of money so they have changed direction. What is however significant is this is arguably the first time double taxation (corporation and dividend tax) has been imposed.
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gb007
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Post by gb007 on Feb 5, 2016 13:33:14 GMT
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duck
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Post by duck on Feb 5, 2016 17:36:01 GMT
No I haven't ...... thank you.
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stevio
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Post by stevio on Feb 5, 2016 22:15:12 GMT
It's an increase but in perspective about 2k/yr. No reason to ditch Ltd as likely pay more tax as self employed
Company pension payments is one way, but limited to about 40k/yr
I'm either:
-live off the approx 10k salary and 5k dividend and eat into savings
-use VCTs to offset the extra tax
Whilst using the companies money to invest in P2P (same as would have done personally anyway)
Then
-close company and take proceeds via entrepreneurs relief
-make children directors and them draw salary and dividend like a cheap form of inheritance
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stevio
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Post by stevio on Feb 5, 2016 22:19:45 GMT
Sorry, last part was meant to be ER when retire or pass on company children when die
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duck
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Post by duck on Feb 6, 2016 17:48:21 GMT
All good points stevio. I'm currently running down my Ltd Co (just me and my brain) and have settled, after long discussions with my accountant, to pay the dividend tax where necessary. Whilst my Company has assets well into 6 figures I have no immediate need for the cash so we will be spreading it out over a decent (read long!) period. Entrepreneurs relief was considered but at 10% it currently held no advantages for me (bearing in mind that GO might find another rabbit under his hat). In the meantime the Company cash is invested which brings up another question, when does the business classification change (with all the associated ramifications) since all income is currently coming from investments not nuclear engineering....
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stevio
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Post by stevio on Feb 6, 2016 18:03:08 GMT
Have to be careful as if classed closed investment company, can't use ER. Which means full CGT on sale of business, rather than 10%.
No set limit, but generally banded about that if more than 30% companies income from investments = closed investment company
Not normally problem as most companies income is from business involved in and small part investments
But if not trading, then easily classed CIC and no ER
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stevio
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Post by stevio on Feb 6, 2016 18:05:07 GMT
However can still run down company funds via salary and dividends
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Post by haineswatts on Mar 7, 2016 23:10:28 GMT
Owner managed companies will be affected the most by the new changes, or individuals with substantial dividend income will also increase tax liabilities. However it is possible to mitigate the dividend tax effects of the new changes: - Pay dividends before 6 April 2016. The tax rates in 2015/16 are lower than those for 2016/17 but care needs to be taken to avoid dividends being taxed at a higher marginal rate, including increasing income over the £100,000 threshold, when personal allowances are reduced - Transfer shares to other family members, to take full advantage of the £5,000 allowance (capital gains tax needs to be considered) |
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