Managing salary and dividend payments from a company to secure the most tax efficient remuneration package for shareholders has always been a key piece of tax planning.
Dividends are taxed at a lower rate of income tax, reflecting the fact that the company making the payment has already paid corporation tax on the profits that are being distributed. In addition no national insurance contributions are payable on dividends.
There has been some speculation that changes to the taxation of dividends may be one way of raising tax revenue whilst not actually increasing tax rates.
For instance, could a change be made to make dividends subject to national insurance contributions…or maybe even income tax?
Any such changes would be very unpopular with all owner managed businesses, who contribute greatly to the economy…is this really what the Government are seeking to achieve?
Watch this space for more details once the Post-Election Budget has been delivered on 8th July. In the meantime, if your dividend payments are imminent, and you are able to, it may be worth accelerating dividends so that they are paid prior to 8 July.
If you have any questions, about remuneration planning, just contact Lesley Sutton on 01484 550 037 or email firstname.lastname@example.org for more details.