What the Dividend Allowance Changes Mean for SMEs

Announced during last year’s emergency (summer) Budget, the proposed dividend tax changes, known as the new tax-free Dividend Allowance, are due to come into force on 6 April 2016, replacing the old Dividend Tax Credit.

Under the tax-free Dividend Allowance changes, all UK residents won’t be taxed on the first £5,000 of dividend income they receive each year, with dividend income above the new £5,000 threshold taxed at:

  • 7.5% on dividend income that falls within the basic rate band
  • 32.5% on dividend income in the higher rate band
  • 38.1% on dividend income in the additional rate band

It’s important to keep in mind that these changes will not affect dividends received via tax-exempt pension funds, as well as dividends you have received on shares in an Individual Savings Account (ISA), as is the case now.

Impact on Small Business Owners

Designed to tax small businesses who purposely pay their owners and executives a small salary (in order to secure their access to the State Pension), with the bulk of their income coming in a larger dividend payment, the government has marketed these changes as a boon for the majority of the population: a £5,000 Dividend Allowance, on top of the current £11,000 personal allowance, sounds rather attractive after all.

However, the impact of the proposed dividend tax changes on small and medium-sized business (SME) owners has the potential to create a negative affect on small business bottom line’s across the country.

In an online petition created under the title “Reconsider the new Dividend Tax for small businesses,” petition creator Frauke Golding noted that:

“The Government have stated that business is going to be at the heart of their programme for the next 5 years. Small businesses make up 99.3% of all private sector businesses and we provide just under 50% of all private sector jobs. There is a real danger that this new tax, along with auto enrolment and minimum wages increases, will have a significant effect on those people brave enough to start up a business that could make a meaningful contribution to the economy and jobs market.”

In response to Mr. Golding’s petition, which at time of writing has received 46,627 of the 100,000 signatures it needs to be considered for debate in Parliament, HM Treasury commented in defence of the dividend tax change, noting that “The Government is fully committed to supporting business and entrepreneurship,” before launching into three paragraphs that touched upon the government’s desire to reduce Corporation Tax from 20 to 18 percent by 2020, as well as a rundown of the benefits small business owners are also soon to receive:

“Owners of small companies will also benefit from a range of other measures announced at the Summer Budget, including an increase in the National Insurance Employment Allowance to £3,000 from April 2016 and a permanent increase to the Annual Investment Allowance to £200,000 from January 2016. They will also pay less tax as a result of the increases to the tax-free Personal Allowance to £11,000 and to the Higher Rate Threshold to £43,000 in April 2016.”

Our Advice

In light of the tax-free Dividend Allowance coming into force on April 6, our advice for small business owners is to take some time to look through the numerous examples the government provide in their Dividend Allowance factsheet to get an understanding of whether you will be better or worse off as a result of the change. For more information on governement changes and the effects they have on you or your business, have a read of our pieces on the following:

Budget 2016: Key Takeaways for Contractors

Budget 2016: Key Takeaways for Companies

Budget 2016: Key Takeaways for Individuals

If that's not enough, we have a wealth of information on our blog too.

For personalised advice to this effect, we encourage you to contact your tax adviser.

Experienced Tax Accountants

To speak with a professional accountant to discuss the tax implications of the new tax-free Dividend Allowance, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.


Budget 2016: Key Takeaways for Contractors

Following on from this morning’s summary on the key talking points from Budget 2016 for individuals, below we’ve summarised the key talking points for contractors from Chancellor of the Exchequer George Osborne’s eighth full Budget.

Keep an eye out for our article summarising Budget 2016 for small and medium-sized businesses (SMEs), coming later today.

New Tax Allowances for ‘Sharing Economy’ Workers

One of the biggest takeaways from Budget 2016 from the point of view of contractors was that the Chancellor has, finally, recognised how traditional taxation methods have been having a negative impact on contractors earning small and one-off payments as part of the sharing economy.

Speaking to the House of Commons, Mr. Osborne said:

43288385_s“We’re going to help the new world of micro-entrepreneurs who sell services online or rent out their homes through the internet. Our tax system should be helping these people so I’m introducing two new tax-free allowances each worth £1,000 a year, for both trading and property income.”

The Chancellor continued by noting that there will be no forms to fill out in order to benefit from this tax break, before claiming that at least 500,000 people will benefit from this change.

Class 2 National Insurance Contributions for the Self-Employed to be Scrapped

The other big announcement, from the point of view of contractors, was that Class 2 National Insurance contributions (NICs) for the self-employed are due to be abolished from April 2018 in favour of the benefits of Class 2 NICs (primarily entitlement to the State Pension) being combined with the benefits of paying Class 4 NICs.

Currently costing contractors and self-employed individuals making a profit of £5,965 or more per year £2.80 per week, from April 2018 you will only be required to pay Class 4 NICs, though it is unclear whether the current weekly cost of Class 2 NICs will transfer directly to the new Class 4 NICs.

Business Rates Abolished for Properties With Value up to £12,000

One of the biggest talking points from Budget 2016 was that of business rates being abolished for all business (commercial) properties with a rateable value up to £12,000, from April 2017. There will also be a ‘tapered’ relief rate on properties between £12,001 and £15,000.

With the current relief rate set at just £6,000, this poses a hugely beneficial increase for small businesses and contractors working from a commercial space. The government estimate that under the new rules 600,000 small businesses will pay no rates at all.

Personal Allowance to Increase to £11,500

Touched upon in this morning’s key talking points for individuals summary, and seen equally as a boon for contractors, from April 2017 the personal allowance will increase to £11,500 (after rising to £11,000 next month).

The personal allowance was just £6,500 when the Conservatives were elected six years ago, displaying an almost 100% increase.

Understanding Budget 2016

To speak with a professional accountant to discuss the impact of Budget 2016 on you as a contractor, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

More Information

If you're interested in the Budget 2016 changes and the impact they'll have on you, feel free to check out our other pieces on the impacts of George Osborne's changes:

Budget 2016: Key Takeaways for Companies

Budget 2016: Key Takeaways for Individuals


Budget 2016: Key Takeaways for Companies

Following on from this morning's summaries on the key talking points from Budget 2016 for individuals and contractors, below we’ve summarised the key talking points for companies from Chancellor of the Exchequer George Osborne’s eighth full Budget.

Focusing on small and medium-sized businesses (SMEs), this is the final part in our article series on Budget 2016. To speak with us directly about this year’s Budget, or for anything else, our contact details are at the end of this article.

New Stamp Duty Rates for Commercial Properties

Coming into effect at midnight on 17 March/last night, the new stamp duty rates for commercial properties represent a complete overhaul in the way in which stamp duty on freehold commercial property and leasehold premium transactions is calculated.

Payroll_TaxAgility Accountants London

A boon for small and medium-sized business (SME) owners, under the new rules instead of stamp duty rates applying to the whole value of a commercial property, Mr. Osborne described how the new rates and tax bands will result in a 0% stamp duty rate for commercial property up to the value of £150,000, with a 2% rate applying for the portion of a commercial property’s value between £150,001 and £250,000, and a 5% rate applying for the portion above £250,000.

Business Rates Abolished for Properties With Value up to £12,000

We touched upon this in our key talking points for contractors summary, though it’s more relevant for companies than it is contractors. One of the biggest talking points from Budget 2016 was that of business rates being abolished for all business (commercial) properties with a rateable value up to £12,000, from April 2017. There will also be a ‘tapered’ relief rate on properties between £12,001 and £15,000.

With the current relief rate set at just £6,000, this poses a hugely beneficial increase for small businesses and contractors working from a commercial space. The government estimate that under the new rules 600,000 small businesses will pay no rates at all.

Employers to Pay National Insurance Contributions on Pay-Offs

If you have taken on employees at your SME, from April 2018 you will need to pay National Insurance Contributions (NICs) on any pay-offs (typically employee termination payments) you make above £30,000.

As is currently the case, should you have to make an employee’s position redundant that employee can receive a pay-off from you of up to £30,000 without you or they having to pay NICs on that amount.

Corporation Tax to Reduce to 17% by 2020

Though it’s a little while off yet, at yesterday's Budget the Chancellor announced that Corporation Tax is due to drop from 20% to 17% by 2020.

Should this reduction come to fruition it will mark a particularly low Corporation Tax rate, given that it was 28% when the Conservatives came to power in 2010. At it’s current rate of 20%, the UK has the lowest Corporation Tax rate in the G20.

Understanding Budget 2016

To speak with a professional accountant to discuss the impact of Budget 2016 on your company, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

If you're an individual or contractor, you needn't go to the trouble. Check out our pieces that are best suited to you:

Budget 2016: Key Takeways for Contractors

Budget 2016: Key Takeaways for Individiuals


Budget 2016: Impact on Individuals

Yesterday, Wednesday 16 March 2016, Chancellor of the Exchequer George Osborne delivered his eighth full Budget to the House of Commons since the Conservatives came into power in 2010; his second since the party’s majority win in May of last year.

Budget TaxAgility Accountants London

Below we’ve summarised the key talking points from Budget 2016 for individuals. You’ll note what the Guardian call a number of “voter-wooing measures” in our summary. With the Brexit vote scheduled for 23 June, the Conservatives were adamant that the forecasts they presented yesterday are predicated on the UK remaining within the European Union.

Keep an eye out for our articles summarising the key talking points from yesterday’s budget for contractors and, separately, small and medium-sized businesses (SMEs), both of which are coming later today.

Personal Allowance to Increase to £11,500

At Budget 2016 Mr. Osborne announced that the Personal Allowance will increase to £11,500 in April 2017, with the higher rate threshold jumping to £45,000.

Before then, however, the current personal allowance of £10,600 is set to rise to £11,000 next month, with the higher rate threshold rising from £42,385 to £43,000.

Capital Gains Tax (CGT) to Reduce from 28-20%

From 6 April 2016 (just three weeks’ time) Capital Gains Tax (CGT) will be reduced from 28-20% for higher rate earners; 18-10% for those paying the basic rate.

Residential property will, however, still be taxed at its current rates, with an eight percent surcharge being payable on top of the new CGT for the residential property itself, and any carried interest that it holds, thus bringing both CGT tax rates back to their former percentage values for residential properties respectively.

ISA Allowance Increases to £20,000, and New Lifetime ISA

From April 2017 the total amount you can save into all ISAs in a given year will increase from £15,240 to £20,000.

The government also announced a new Lifetime ISA which, from April 2017, will allow any adult under the age of forty to save up to £4,000 per year while receiving a 25% bonus on this money from the government. Any money put into your Lifetime ISA can either be saved until you are over sixty and used in your retirement, or withdrawn to purchase a home, if doing so will turn you into a first-time homeowner.

Sugar Tax

In a surprise move the Chancellor has imposed a levy on soft drinks with a total sugar content above 5 grams per 100 millilitres (and an even higher levy for drinks with more than 8 grams per 100 millilitres), from April 2018.

Television chef Jamie Oliver, who has campaigned for a sugar tax for many years (and who personally introduced one in his own restaurants), said yesterday “I never thought they’d do it.” The government noted that the approximately £520m to be raised from the tax will go towards funding school sports programs.

Longer School Days Available to 25% of Secondary Schools

Talking of schools, up to £285 million of funding (some of which coming from the above-mentioned sugar tax) will be set aside to give 25% of secondary schools across the country the option to opt in for longer school days from September 2017, should they so wish.

This comes in tandem with funding aimed at turning every primary and secondary school in the country into an academy by 2022.

Fuel and (Most) Alcohol Duty Frozen

Last in our summary comes a few aforementioned “voter-wooing measures”, including fuel duty being frozen for the sixth year in a row, a measure which the government estimate will save the typical motorist £75 a year.

Rates on spirits, beer, and the majority of ciders will also be frozen for the 2016-17 tax year, and in a measure likely intent on wooing Welsh voters, the crossing toll on the Severn Bridge will be cut in half, down to £3.30.

Understanding Budget 2016

To speak with a professional accountant to discuss the impact of Budget 2016 on you as an individual, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.

If you're a company or contractor, you needn't go to the trouble. Check out our pieces that are best suited to you:

Budget 2016: Key Takeways for Contractors

Budget 2016: Key Takeaways for Companies


How the Emergency Budget Impacts Individuals and SME Owners

Budget TaxAgility Accountants LondonOn Wednesday Chancellor of the Exchequer George Osborne delivered an emergency (summer) Budget, just four months after Budget 2015 was delivered on 18 March, ahead of the general election.

The Budget focused, for the first time in almost twenty years by a Conservative government, on a surprise rise in the minimum wage. Also looking at an increase in the Employment Allowance, a cut in Corporation Tax, and a host of welfare reforms, the key points for individuals and small business owners from this week’s emergency Budget are outlined below.  For a more indepth summary, read our Summer Budget newsletter:

New National Living Wage

“Let me be clear: Britain deserves a pay rise and Britain is getting a pay rise.” Those were the words of George Osborne on Wednesday ahead of the introduction of the new National Living Wage.

Promising a minimum wage (for workers aged over twenty-five) of £7.20 an hour from April 2017, rising to £9.00 an hour by 2020 (with 6 percent a year average increases between these two dates), Mr. Osborne claimed that the new National Living Wage will increase the wages of 2.7 million workers across the United Kingdom.

Employment Allowance Increased to £3,000

From April 2016 the Employment Allowance will be increased to £3,000 from £2,000, allowing small business owners to cut a further £1,000 from their National Insurance bill. Combined with the new National Living Wage, from next year small business owners will be able to employ four members of staff, full time, while not paying any National Insurance.

Personal Allowance Increased to £11,000 in April 2016

We knew it was coming, yet on Wednesday the Chancellor confirmed that the tax-free Personal Allowance will increase to £11,000 for the 2016-17 tax year, with the higher rate tax threshold increasing to £43,000.

Corporation Tax Cut to 18% by 2020

Seen as an olive branch to businesses large and small that will, inevitably, be affected by the higher new National Living Wage, Mr. Osborne’s plan to cut Corporation Tax by 1 percent to 19 percent by 2017, and a further 1 percent to 18 percent by 2020, may help heal some open wounds.

Annual Investment Allowance

From January 2016 the annual investment allowance will be permanently increased to £200,000 (it was previously increased on a short-term basis), meaning business owners can reduce the full cost of a number of items (including machinery costs) up to £200,000 of their pre-tax profits per year.

If you use the Tax Agility app, we’ve already added this change in the ‘Main Capital and Other Allowances’ section.

Welfare Reforms

In the emergency Budget the Chancellor announced a number of reforms to the welfare system that will make it, in the Government’s words, “fairer for taxpayers who pay for it, while continuing to support the most vulnerable.”

These reforms included a four year freeze on working-age benefits (including tax credits and Local Housing Allowance) from 2016-17, and household benefit caps being reduced to £20,000, or £23,000 in London.

New £5,000 Tax-Free Dividend Allowance

The new £5,000 tax-free dividend allowance means only individuals who make over £5,000 dividend income per year from shares will have to pay tax on this income, though tax rates will be increased for those making over this amount.

Experienced Personal and Small Business Accountants

To speak with a professional to discuss how the emergency Budget may affect you personal finances, or those of your business, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no-obligation meeting.


The Emergency Budget: What SME’s Could Expect

Small Business_TaxAgility Accountants LondonChancellor of the Exchequer George Osborne has announced that he is to deliver an ‘emergency’ Budget (also referred to as a summer Budget) on July 8 2015, just four months after Budget 2015 was delivered on 18 March 2015 ahead of the recent general election.

Though it may seem unusual to deliver two budgets in a year, Mr. Osborne’s very first Budget was also an emergency Budget, taking place directly after the Conservative and Liberal Democrat coalition was formed in 2010.

Why Hold an Emergency Budget

Next month’s emergency budget is taking place because the policies announced and elaborated upon in the last budget, on 18 March, were created by a coalition Government; not the Conservatives alone.

With the Conservatives winning an overall majority at the general election on 7 May, it became clear with the announcement of the emergency budget that the Tories now wish to declare their own policies, without any pressure from (or consolations for) the Liberal Democrats.

What to Expect

Though the Chancellor has already stated that the focus of next month’s emergency budget will be to turn the Conservatives election promises into a reality by focusing on delivering on the commitments they made to working people at Budget 2015, if you’re a small or medium-sized business (SME) owner there won’t be a shortage of things to listen out for during July’s emergency Budget

It’s being reported across many sources that George Osborne will use his platform at the emergency Budget to speak of the country’s latest economic growth forecasts (with a focus, as always, on economic recovery), alongside taking the time to outline further the Government’s plans, as laid out in the Conservative Party’s manifesto prior to the general election, to:

  • Provide spending cuts and reforms to individual welfare (reducing the Welfare bill by £12 billion a year) and pensions, as we detailed in our recent summary of the pension reforms,
  • Prevent rises in Income Tax, Value Added Tax (VAT), and National Insurance; a direct benefit to small business owners,
  • Increase the tax-free personal allowance amount to £11,000 in April 2017, and increase the higher-rate tax threshold,
  • Increase the Inheritance Tax threshold on homes to £1 million by 2017.

Although it’s unclear whether it will receive a mention during the emergency Budget itself, SME owners are encouraged to keep an eye on any developments surrounding the in-out European Union (EU) Referendum, which is currently scheduled to take place before the end of 2017. An ‘out’ vote (or further stalling on when a vote should take place) has the power to affect your business even if you don’t currently trade in or with other countries within the European Union.

Experienced SME Accountants

To speak with a professional to discuss how the emergency Budget could affect your business, or for any other reason, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no-obligation meeting.


Budget 2015: Key Takeaways for SMEs

Budget TaxAgility Accountants LondonToday, Wednesday 18 March 2014, Chancellor George Osborne delivered his fifth full Budget to the House of Commons since the Conservatives came into power; Mr Osborne’s last before May’s upcoming General Election.

Below we’ve summarised the key talking points from Budget 2015 for small and medium-sized businesses (SMEs):
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Full Budget 2014 Report

2014-Budget-Report_TaxAgilityFurther to our blog posted earlier, we are pleased to provide a full report of the Budget 2014, highlighting the main items affecting both SME business owners and individuals.

The Tax Agility 2014 Budget Report provides a concise summary of the announcements made by Chancellor George Osborne during the 2014 Budget on Wednesday 19 March 2014.

Please click the image or the link below to download the full report:

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Autumn Statement: Full Report from Tax Agility

AutumnStatement2013_TaxAgility Accountants LondonFurther to our blog posted yesterday, we are pleased to provide a full report of the Autumn Statement, highlighting the main items affecting both SME business owners and individuals.

Delivering the 2013 Autumn Statement, the Chancellor said the latest forecasts from the Office for Budget Responsibility proved that “Britain’s economic plan is working” but warned that the “job is not done.”
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Autumn Statement: Key Points for Individuals and SMEs

Autumn_TaxAgility Accountants LondonEarlier today George Osborne, Chancellor of the Exchequer, delivered his Autumn Statement to Parliament.

Following are a summary of the key points affecting both SME business owners and individuals, taken from today's statement.
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