Mixed Budget News

SnowMan

plunt wrote: »

hmmm correct me if im wrong but essentially a company was paying out a dividend of £111.11, of which 11.11 was getting paid straight to the government, so I would end up with £100. so if that middle part has now been stopped, does that then mean companies can just pay out that £111.11, in essence increasing dividends.

Need to brush up on my dividend tax credit knowledge before it disappears!

It is a common myth that £11.11 has been deducted, they still only have £100 to pay out, have a read of this

http://www.theaic.co.uk/sites/default/files/AICTaxationofDividendsConsumerguide.pdf

People sometimes refer to the total of the dividend plus the tax credit as the ‘gross’ dividend, but again this can be misleading as it suggests there was a bigger dividend which was then subject to tax before it was paid to you.

The only potential change is that corporation tax is being reduced in the budget it appears, which taken on its own means the company can afford to pay out more in dividends, but that's a separate issue.

talexuser

plunt wrote: »

dont forget the tax free allowance on savings interest of £1000 on basic rate and £500 for higher rate

Ah!, of course, so if you don't reach the basic allowance you can get £6000 of savings interest before tax.

TheTracker

SnowMan wrote: »

The only potential change is that corporation tax is being reduced it appears, which taken on its own means the company can afford to pay out more in dividends, but that's a separate issue.

Your description of the bands is the best I've seen yet. I saw one of the web stories say it only applied to "those earning over £140,000" but instead I gather the £140000 number refers to the sort of dividend paying portfolio you'd need before hitting 5k (3.6%).

This is a measure to cut down on personal service companies (PSC) which in law have no definition, and a if you cant beat them join them IR35 replacement measure.

My calculation show a couple percent drop in net income ... will have to see some other data/examples before being sure. Haven't quite got my head around what this means for my VCT/EIS side of things either, it might just make it academic.

plunt

SnowMan wrote: »

It is a common myth that £11.11 has been deducted, they still only have £100 to pay out, have a read of this

http://www.theaic.co.uk/sites/default/files/AICTaxationofDividendsConsumerguide.pdf

The only potential change is that corporation tax is being reduced in the budget it appears, which taken on its own means the company can afford to pay out more in dividends, but that's a separate issue.

anyone unsure as to how tax credits work should really read that brief document, very helpful! thanks!

kidmugsy

talexuser wrote: »

f

Where does £17000 comes from if the new personal allowance will be £11000 with £5000 of savings allowance?

Perhaps from the £1k p.a. interest you'll be allowed tax-free?

kidmugsy

"The dividend tax credit will be replaced ": hurray for that. Sheer gain on the anti-needless-confusion front.

redux

plunt wrote: »

hmmm but that tax credit portion always meant that you were paying 10% without even seeing it hit your account. so does that mean you will technically be getting higher dividends in ISA's now?

Or do tax credits still exist in ISA's but just not unwrapped investments? Im a little confused here!

I'm mystified too, and I wonder if even Osborne hasn't got a full grasp of this part of his subject.

He slagged off Gordon Brown for taxing dividends in pension schemes, then said dividends in pension schemes will remain tax free.

jimjames

Reading elsewhere it seems this is more designed to impact personal service companies where income is paid as dividends instead of income, maybe any effect for the rest of us is unintentional.

kidmugsy

jimjames wrote: »

Reading elsewhere it seems this is more designed to impact personal service companies where income is paid as dividends instead of income, maybe any effect for the rest of us is unintentional.

Good point. It may be that HMRC have told him how few people get dividend income above £5k p.a. outside tax wrappers, except for those ps company people. I'm afraid those "few" may have to take it on the chin.

I must admit I don't yet know how, next tax year, the £5k allowance for dividends will interact with the £5k allowance for interest for low income people, and the £1k allowance for interest for 20% taxpayers. No doubt it'll be clear by ... autumn?

westy22

Its not just PS companies though - almost all close companies (5 or fewer shareholders / directors) will be likely to have been paying themselves a minimum basic salary (around £8k or so) and then topped up with dividends.

Many small company owners will be adversely affected by this change.