OWNER-managers beware! Last time we highlighted the major reform to dividend taxation that was announced in the recent budget that will affect all investors, whether they are company owners or simply holders of quoted shares, from April 6, 2016.
Today we concentrate on company owners who have in the past received dividends from their companies rather than remuneration.
Whilst these changes will reduce the advantage of receiving dividends, it will still generally be beneficial for tax purposes to continue to receive dividends rather than reverting to salary which suffers PAYE.
In order to minimise the effect of these changes, consideration could be given to voting a large dividend prior to April 5, 2016, which can be drawn down over the following months or years.
Clearly the company must have sufficient reserves to do this.
Also consider transferring some of your shareholding to your spouse or civil partner to utilise their dividend income exemption/lower tax rates.
For more information or assistance contact Nick Parker on 01256 486814 or email nick.parker@bakertilly.co.uk.
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