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How the dividend rate increase may affect small and medium-sized enterprises.
KEY POINTS
- The new dividend allowance is really an exemption.
- Consider whether incorporation is still viable.
- Residential landlords may find it beneficial to incorporate.
- Pay dividends early to avoid the new rate.
The additional 7.5% dividend rate was a notable announcement in the summer budget at least as an innovative revenue-raising measure. It was therefore surprising that the Finance Bill published a week later omitted with no explanation the clauses dealing with the new rate. However closer inspection of the Red Book at section 2.57 (“Dividend taxation”) indicates that legislation will be included in the Finance Bill 2016.
Perhaps I should therefore add at this point that this article is based on assumptions of what the legislation will say based on HMRC’s examples etc.
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