Mixed Budget News

kangoora

westy22 wrote: »

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.

My wifes company, the owner pays him and his wife about £8k/year and they each pocket around £5k/month in dividend drawings. I'm pretty sure the intent of the law wasn't for dividends to be used like this.

westy22

kangoora wrote: »

My wifes company, the owner pays him and his wife about £8k/year and they each pocket around £5k/month in dividend drawings. I'm pretty sure the intent of the law wasn't for dividends to be used like this.

I estimate that they will be paying an extra £4,000 each per year in tax under the new system:

£11,000 Personal Allowance - £8,000 salary = £3,000 surplus PA

£60,000 dividends - (£3,000 PA surplus + £5,000 Dividend Allowance) = £52,000 taxable.

approx £35,000 @ 7.5% = £2,625 + £17,000 @ 32.5% = £5,525 totals £8,150 compared to approximately £4,200 paid under the current system.

It's still significantly less than they would have paid under PAYE.

TCA

talexuser wrote: »

Seems quite a loss to lose the 5k allowance and get just 1k eventually instead for those in that position.

I thought I read somewhere that the 2015/16 rules could still apply next year to those who could make use of it.

Before the personal allowance was changed, I seem to remember a tax-free figure of £16,800 being banded about. Which was made up of:

Personal allowance £10,800
Replacement of 10% band with 0% band on £5,000
Personal savings allowance £1,000

In fact, here it is below:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/414026/Savings_factographic_final.pdf

And here:

http://www.thisismoney.co.uk/money/saving/article-3010018/Has-Chancellor-George-Osborne-s-radical-Budget-reform-killed-cash-Isa.html

"From April 6, 2016, banks and building societies will stop automatically deducting interest from your savings. It will all be paid tax-free.Those who earn below £16,800 a year won’t have to pay any tax on savings interest. This is because they’ll benefit from the £10,800 personal allowance, the abolition of 10 per cent tax on the first £5,000 income for low earners and tax-free interest up to £1,000."

talexuser

TCA wrote: »

I thought I read somewhere that the 2015/16 rules could still apply next year to those who could make use of it.

Yes, from bufget document updated to £17000 total here
http://forums.moneysavingexpert.com/showpost.php?p=68745565&postcount=10
but the 5k there might be the new dividend allowance?

But the 5k savings allowance was supposedly only for one year
http://forums.moneysavingexpert.com/showpost.php?p=68748293&postcount=23

But here the savings 5k becomes 2k for next year only for those who qualify according to here
http://www.moneysavingexpert.com/savings/tax-free-savings?_ga=1.146437239.2133978724.1421623913

and the 5k savings is superceded by the 1k savings (except where you can get 2k just for one year) and the 5k dividends allowances.

Confusion reigns!

Peter167

I haven't seen any official docs on the £2k allowance or the removal of the £5k allowance. The gov doc does give

'That means from April 2016, you won’t have to pay tax on your interest if your taxable income is less than £16,800.'.

This was written before the recent budget so doesn't refer to the div stuff. However George did say that with the new div allowance you can earn a total of £17k tax free, so I'm stumped. a

colsten

Peter167 wrote: »

However George did say that with the new div allowance you can earn a total of £17k tax free, so I'm stumped. a

What he said is

1.187 Combined with the increases the government has made to the personal allowance and the introduction of the Personal Savings Allowance, from April 2016 individuals will be able to receive up to £17,000 of income per annum tax-free, and separately invest up to £15,240 per annum through an ISA tax-free.

£11,000 personal allowance +
£5,000 untaxed dividend income +
£1,000 untaxed interest =
£17,000

Peter167

Yes, agreed. But doesn't explain why the gov doc says from April 2016... Explaining the £1k and £5k allowances, unless the recent budget changed this.

masonic

Peter167 wrote: »

Yes, agreed. But doesn't explain why the gov doc says from April 2016... Explaining the £1k and £5k allowances, unless the recent budget changed this.

The new dividend allowance starts from April 2016. So does the £1k savings interest allowance.

colsten

masonic wrote: »

The new dividend allowance starts from April 2016. So does the £1k savings interest allowance.

and the personal allowance increase to £11,000

Peter167

So is the £5K saving allowance not valid in 2016-17? If not, where are the details of this?