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UK Businesses Rail Against Dividend Tax Changes

by Robert Lee, Tax-News.com, London

29 September 2015


A campaign against recent changes to the taxation of UK dividends has attracted the support of 25,000 business leaders, according to its founder, Serena Humphrey.

Humphrey, owner of financial training company The F Word, launched Survive & Succeed – the Campaign for Successful SMEs on September 10. She is aiming to receive at least 100,000 signatures to her petition against the reforms. This would require Parliament to debate the issue.

Chancellor George Osborne's Summer 2015 Budget provided for the replacement of the Dividend Tax Credit with a new Dividend Allowance. The allowance will be available to anyone who has dividend income. According to the Government, it will mean that the first GBP5,000 (USD7,612) of dividend income is tax-free. The allowance will apply from April 2016.

Tax will be charged at the following rates on any dividends received above the GBP5,000 allowance: 7.5 percent on dividend income within the basic rate band (up to GBP43,000, with the first GBP11,000 covered by the personal income tax allowance); 32.5 percent on dividend income within the higher rate band (GBP43,001-GBP150,000); and 38.1 percent on dividend income within the additional rate band (over GBP150,001).

Humphrey said: "With other changes coming into effect, such as auto enrolment, a 10 percent increase in the Minimum Wage, the 3.5 percent insurance premium tax increase, and the imminent interest rate rises, this dividend tax is an attack too far on small businesses. And we need to remember that those profits have already been taxed at 20 percent, so this 7.5 percent tax means we're [small business owners] paying 27.5 percent tax, well above the basic rate of 20 percent."

Humphrey added: "We fear that this the thin edge of the taxation of entrepreneurs and marks a worrying change to the Government's approach to the wealth creating, job creating army of small business owners who account for 99 percent of all private sector business. Many experts believe that the next moves will be to further increase taxation on dividends, ultimately forcing us onto payroll where there are absolutely no benefits at all to the business owner. This means we'd be treated like normal employees, which we really aren't. We're the first ones to not get paid when cash is tight, first ones to forgo holidays, days off and time with the family, and the ones putting everything at risk."

TAGS: tax | small business | business | interest | entrepreneurs | employees | United Kingdom | tax thresholds | payroll | small and medium-sized enterprises (SME) | tax rates | dividends | tax reform | individual income tax

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