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  • Taxation of dividend income from April 2016. The present 10% dividend tax credit is being abolished from April 2016. In its place an annual dividend tax allowance of £5,000 is being introduced. Dividends received will be free of further charge to Income Tax up to this limit. Above the £5,000 limit dividend income will be taxed as follows:
    • Basic rate tax payers at 7.5%
    • Higher rate (40%) tax payers at 32.5%, and
    • Additional rate (45%) tax payers at 38.1%

    Shareholder directors of small companies that pay limited salaries and high dividends may be affected by this change and should review their dividend strategy.

  • National Insurance Employment Allowance. From April 2016 the present £2,000 allowance is being increased by 50% to £3,000. The Chancellor has also announced that the allowance will be withdrawn for one person shareholder/employee companies.
  • Annual Investment Allowance (AIA). The annual limit for this generous tax allowance, presently up to £500,000 of qualifying expenditure can be written off against taxable profits, was due to revert to £25,000 from 1 January 2016. It has been confirmed that the £25,000 limit will instead increase to £200,000 with no further changes currently tabled.

It was also announced that Corporation Tax rates would fall to 19% in 2017 and 18% in 2020.

A number of counter measures will also be introduced to curb tax avoidance. This continues HMRC’s strategy to root out and penalise businesses that continue to misuse tax legislation in a way not intended by parliament.

You should always seek professional advice before acting on the basis of this information given herein.

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