It was a big surprise that George Osborne proposed rule changes to the way that dividends are taxed in the budget a few weeks ago.
HMRC haven’t published full details yet but here is what we know so far.
Currently you can take out £28,606 dividends tax free (on top of your £10,600 salary). From next year, the first £32,000 will be taxed at 7.5%.
Currently you receive a tax charge of 25% after the first £28,606, next year after the first £32,000 you will receive a tax charge of 32.5%.
So despite what you may thing, our friend George Osborne has hiked up the taxes for owners of limited companies!
There’s two big implications. Firstly, I suspect that we will be urging clients to take out more from their companies this tax year – the tax year ended 5 April 2016. Secondly, personal tax planning will become all important to avoid the dreaded 32.5% (alongside the 20% corporation tax, this is looking like 52.5% tax rate!).
