For many small business owners and investors, perhaps the most unwelcome tax change of recent times was the introduction of an additional 7.5% tax on dividends, albeit with a £5,000 'tax free' dividend allowance.
The proposed cut of this allowance from £5,000 to £2,000, although potentially delayed by the election, only makes this worse.
Whilst there is little one can do in respect of the dividends of one's own business, there is lots that we as financial advisers can do for investors in respect of mainstream investment dividend income.
If you've been hit by the additional 7.5% dividend tax, contact us for a no obligation review.
The proposed change would see the tax-free dividend allowance reduced to £2,000 from April 2018, down from the current figure of £5,000. The move was intended to impact wealthy directors of companies and small businesses, as well as achieving greater equality between employed and self-employed workers, as the latter often work through their own companies and pay themselves through dividends as opposed to taking a salary. However, after conducting research into the potential impact of the changes, the Share Centre has found that up to 90,000 investors will experience a reduced annual income next year. Many are pensioners, who depend upon their dividend income in order to pay their monthly bills.