As of April 2016, notional 10% tax credit on dividends will be abolished. Instead, a £5,000 tax-free dividend allowance will be brought in. Dividends above this level will be taxed at 7.5% on the basic rate, 32.5% on the higher rate and 38.1% on the additional rate.
The changes, announced in the Chancellor’s summer budget, have been met by much furore amongst the small business community, and a campaign has been launched with the aim of attracting the support of 100,000 business leaders via signatures on a petition. Once that figure is reached, the campaign will be considered for debate in Parliament.
70,000 Signatures Still Needed
Launched on September 10 by small business owner Serena Humphrey of financial Nottingham based training company The F Word, the petition has so far been signed by almost 30,000 people.
Serena said, ‘There is massive interest in scrapping the tax on dividends and helping small and medium-sized enterprises have a better chance of surviving. We’re asking the Government to reconsider the tax.’
Serena points out that pension auto-enrolment, the increase in the Minimum Wage and insurance premium tax and the new Living Wage for the over 25s will make it even more of a challenge for smaller companies to survive. ‘This dividend tax is an attack too far on small businesses,’ she says, continuing: ‘Those profits have already been taxed at 20 per cent, so this 7.5 per cent tax means we’re paying 27.5 per cent tax, well above the basic rate.’
Where to Find the Petition
If you agree with Serena and would like to sign the petition you can do so by following this link. The deadline is 24 February 2016. The Government’s response to the campaign can also be read by following the same link.
If you are concerned as to how the new dividend taxation system will affect your business finances, don’t hesitate to discuss the matter with your bookkeepers who will be able to explain the potential effects in your particular situation.