Expert urges business owners to act over new tax hike
A tax expert at accountants and business advisors Whitley Stimpson is encouraging business owners to take action after the after the Government announced a 1.25 per cent tax hike on dividend payouts as part of its new Health and Social Care Levy.
Many receive income through dividends as well as or instead of the payroll and the new scheme set to be introduced from April 2022 will mean basic-rate payers will now pay an 8.75 per cent tax on dividends, up from 7.5 per cent after the first £2,000.
Higher-rate payers will pay 33.75 per cent, up from 32.5 per cent and those paying the top rate of tax will pay 39.35 per cent, up from 38.1per cent.
For example, someone who is a higher rate taxpayer taking £10,000 in dividend payments needs to pay 33.75 per cent on £8,000 of dividends with a dividend tax bill of £2,700, an increase of £100 on the current system.
Owen Kyffin, director of Whitley Stimpson, said: “The Government is acting quickly to try and plug the yawning gap in its care budget and these measures will come as a blow to many business owners and sole traders who use dividends who have already had to struggle through the pandemic.
“Dividend payments have been hit in recent years with the tax-free allowance being cut from £5,000 to £2,000 in 2018 and it seems those running businesses are becoming an easy target for HMRC.” he said.
Owen urged business owners to take advice on how to ease the blow of the tax hikes.
“ISAs and pensions are still attractive options for dividend income but individual circumstances vary according to the individual, so it is important that business owners receive the right advice before it is too late.”
More in Accountants
How the Thames Valley and Solent regions align with the government’s...
The government’s 2025 industrial strategy (IS-8) sets out a clear ambition to drive productivity, innovation, and globally competitive growth across eight priority sectors. The Thames Valley and Solent, spanning Berkshire, Oxfordshire and Hampshire, is already delivering strongly against these goals, underpinned by an innovation-led, IP-rich, and service-focused economy.
New tax year, new pressures – but planning opportunities remain
As the new tax year begins, business owners are facing one of the most challenging operating environments in recent years. Rising costs, tax changes and global and economic challenges are placing sustained pressure on margins, cash flow and long-term planning. Increases to the National Minimum and Living Wage, higher fuel and transport costs, elevated borrowing rates and […]
James Cowper Kreston Join B4 as Platinum Members
B4 is delighted to announce that James Cowper Kreston, one of Oxfordshire and the Thames Valley’s leading firms of accountants and business advisers, has joined the B4 network as a Platinum Member.
From this author
Why having an audit can boost your business
Many directors will wince at the prospect of an audit, seeing it as a necessary evil to meet statutory obligations.
Whitley Stimpson welcomes Sushma to Bicester
Leading accountants and business advisors Whitley Stimpson, announces the appointment of Sushma Pandey who joins the company’s Bicester office.
FRC Proposes Major Overhaul of Auditing Standards
In a bold move, the Financial Reporting Council (FRC) has unveiled proposed changes to auditing standards that could have a major impact on the financial world, according to chartered accountants and business advisors Whitley Stimpson.