In April 2016 the changes to tax law mean that dividends will be taxed differently and that owner managed limited companies will need to plan ahead.
From 6 April 2016 the first chunk of dividends, which were previously taxed at an effective rate of 0%, will be taxed at 7.5%. Whilst this may not seem much, dividends are paid out of taxed profits so have already been taxed at 20%. This means that this section of income will effectively be taxed at 27.5%.
These new tax rules are changing the way we plan and the advice that is being given to new businesses.
For existing businesses, you have until 5 April 2015 to take advantage of current tax thresholds and rates. Its time to do that.
For new businesses, it is worth considering very carefully whether to incorporate or not.
We can advise you on these matters, so give us a call if you have any questions.