Mel Hackney gives an overview of the forthcoming changes and why small business owners should be reviewing their remuneration strategy

From April 2016, the income tax rate of dividends is increasing. This means that if you are a shareholder and have adequate distributable reserves within your company, now is the time to consider declaring dividends in order to make your distributions as tax efficient as possible.

The tax rate of dividends at a basic rate level has been at an effective rate of 0% for a number of years. However, from April this year, this rate is increasing to 7.5% – still lower than the rate of tax applied to employment and self-employment income, but the effect is to make dividends less tax efficient than they were previously.

There are many tax efficient ways for a shareholder of a small business to extract profits without relying purely on drawing dividends, and if you think this is an area where you might need some guidance, we would be very happy to help. Please contact Mel or Steve to set up a meeting.