From the 6th April 2016, the current dividend system of a notional 10% tax credit ends. It will be replaced by a new dividend allowance where everybody will be entitled to 0% tax on the first £5,000 of dividend income.
Source: HMRC
So those of us who take a minimal salary, but take a larger dividend payment will get shafted, once we go over £5k, and will pay 32.5% tax.
The argument on one side is small business owners have been getting away with out paying too much tax, and now the issue has been addressed.
The other argument (which is the camp I'm in) is that small business owners take huge financial risks in starting a business, deal with lots of administration hassle, stress and red tape, and a lot of us employ people, as well as feed the local economy by using subcontractors and all elements of the supply chain.
I saw a good argument that business owners were being taxed on success, as you can only pay yourself a dividend if you are in profit. Business owners are the last ones to get paid, and it seems one of the remaining perks to running a business is about to disappear.
So what do you think? Are you aware of the changes?
