Pre-budget Dividend Tax Planning For March 2016
Are you going to be paying more?
This week we will have the Spring Budget. Lots of what the Chancellor is going to talk about has already been pre-announced. One of these changes is new rates of tax on dividends ...
It may be worth thinking about some tax planning thanks to this week's Spring Budget.
copyright: iakov / 123rf stock photo (licensee)
Now, although these changes don't start until the new tax year starts, the canny tax saving idea is to pay more dividends before then.
"This isn't always a straightforward decision!"
You need to consider if it would take you over another threshold, for example, into 60% or 45% tax. If you normally pay higher rate tax on your dividends then taking some extra dividends in March 2016 may well save you tax!
Is trading as a limited company still be the best option? Yes, a limited company probably is the best way to trade, but if you are a very small business, then it might be worth checking with an accountant.
In our view, there is still a benefit in tax terms for most individuals to continue to trade as a limited company. The tax saved by incorporation compared to being unincorporated will be reduced next year, but there is still an annual tax saving.
Is it still better to take a dividend rather than an increase in salary? We believe there is still a benefit for a director-shareholder to take a dividend rather than a salary.
"The amount of the tax saved will be less than under the current regime!"
As for more tax on tobacco and wine? Yes probably! But wait and see what happens on when he stands up to speak!
Until next time ...
I've been an accountant in and for business since 1987 and have a wide experience of consultancy, audit, accounts, taxation and wealth planning work from individuals and small businesses to multinational corporations and charities.
My eclectic interests in growing and developing business span a number of areas … and can be summarised as strategic business advice and tax saving advice.
I have worked with the Chamber of Commerce to deliver courses for people about starting up in business and have lectured about tax for a major accountancy practice and for Milton Keynes College.
I relax by reading fiction and by getting away from the office in a campervan.