Proposed changes to dividend taxation

Steve ElliottPosted 9 September 2015 By Steve Elliott, Business Recovery and Insolvency Partner In Business Recovery & Insolvency

Insolvency Practitioners (quite rightly!) generally give tax advice a very wide berth but the two disciplines do occasionally intersect and this may be one such occasion.

Much will be written and I suspect that there will be considerable debate between professional advisers and their clients about the proposed new rules on taxation of share dividends coming in from April 2016; scrapping the 10% notional tax credit and introducing a tax free dividend allowance of £5,000 but with a “sting in the tail” of an increase in tax payable on dividends of 7.5% at all levels.

Many small companies currently favour low directors’ salaries supplemented by dividends but the new regime will narrow the taxation gap between salary versus dividends and I’m sure that will also become a “frequently asked question” in client meetings.

There may be some instances where it will be tax/expense effective to take advantage of the Members Voluntary Liquidation route, particularly where Entrepreneurs Relief is possible (see my earlier related article - Members' Voluntary Liquidation).

We are always able to quote competitively for a bespoke MVL service so it may be worth considering that option early.

To discuss this or anything else contact Steve Elliott on 01793 818300 or send him an email.

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