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Reduced Dividend Allowance Makes a Return

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One of the main discussion points from Budget 2017, the proposed cut contractors’ tax-free dividend allowance by £3,000 has been officially re-tabled by the government.

But unlike last week’s re-tabling of Making Tax Digital, where a delay has been put in place, the cut in the allowance will go ahead from April 2018, as planned.

The absence of a delay not only means — in officials’ words — that “those affected” by the cut “should continue to assume” that their dividend tax-mitigation strategies will still be needed.

It also means that there will be limited scope to debate or revise the proposal (due to raise £1billion extra by 2020), because the bill to pass it will come at a busy time, partly due to Brexit.

This will result in tax hits of £225, £975 or £1,143 for basic, higher and top rate tax payers.

Overall tax strategies will remain virtually the same but as with recent changes to the way dividends are taxed, increase the tax burden on small businesses.

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