Budget 2015 - Dividends!

[Shaoxter]

Dividend tax credit to be replaced with a new tax-free allowance of £5,000 on dividend income. Rates of dividend tax to be set at 7.5%, 32.5% and 38.1%.

So for up to the higher rate threshold of £43k, I make it £2,025 worse off (43,000 - 11,000 - 5,000) x 7.5% Gets even worse above that.

So what is a powerfully built company director supposed to do now?

[PurpleMoonlight]

Yes I agree, some £2000 pa worse off assuming £11,000 is put through PAYE.

[worsy]

http://www.pistonheads.com/gassing/topic.asp?h=0&a...

[oop north]

Shaoxter said:

Dividend tax credit to be replaced with a new tax-free allowance of £5,000 on dividend income. Rates of dividend tax to be set at 7.5%, 32.5% and 38.1%.

So for up to the higher rate threshold of £43k, I make it £2,025 worse off (43,000 - 11,000 - 5,000) x 7.5% Gets even worse above that.

So what is a powerfully built company director supposed to do now?

As someone said still better than putting all through PAYE (employer and employee NI? No thanks!) - but one solution might be disincorporation to pay NIC at 9% on profits from 8k to 42k and then 2% after that, rather than suffer an additional 6% on all profits from £16k upwards. Another is to increase pension contributions to get relief at 46% before that gets (possibly) chopped to 20%, as has happened to buy to let interest expense

Ah well, lots more work for accountants....

[Eric Mc]

Good job he simplified everything

[oop north]

I am theroretically the wrong sort of accountant to get more work from it (unlike Eric) but it will make calculations of loss of earnings that I do more complicated...

[Shaoxter]

worsy said:

http://www.pistonheads.com/gassing/topic.asp?h=0&a...

Thanks, will move my questions to that thread.

oop north said:

Ah well, lots more work for accountants....

Yeah in my case, a lot more work for me!

[jdearden]

Aw hat are the thresholds and cut off for each percentage.

[trowelhead]

It is a sly dig this one... Very odd to on one hand lower corp. tax, but then increase tax on dividends. I suppose bigger companies will benefit, smaller ones won't.

Still - i was reading earlier that our corp tax rate is lowest in G20 - USA 40%, France at 33%, Germany at 30% some of the Scandinavian countries close to 50%!

Just cements yet again that it is good to stay under the higher rate threshold. I'll be leaving more cash to build up in company next year, and using to buy properties.

Here is a useful calculator that should give you an idea of how much worse off one would be under new rates:
http://www.hl.co.uk/news/articles/budget-2015-chan...

Edited by trowelhead on Saturday 11th July 18:56

[Ozzie Osmond]

It's back to the future. Everyone will be scrabbling about trying to achieve Capital Gains taxed at 28% instead of dividend income taxed at up to 38%.

[trowelhead]

I wonder if more people will use the method of taking as little as possible from the company, letting cash build up for a couple of years and then closing the company under entrepreneurs relief at 10% then starting again next day?

[Eric Mc]

There already are restriction on this course of action - unless the company is formally liquidated as opposed to "struck off".