Contractor Blog Zone
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On the 6th April, the new – we won’t say improved – dividend tax kicked in.
Just to recap on our budget blog of last month, the bottom line for the majority of CEJ’s clients is that there will be now be 7.5% personal tax to pay on all dividends over £5k per year – so if you’re taking the maximum basic rate earnings of £43K, next year you’ll be paying an extra £2k a year in dividend tax.
A loss in earnings is never a good thing. We know this. BUT we are here to reassure you of two things.
First, that despite the government’s efforts – all in the name of “simplifying the tax system”, apparently – that going limited is still the best, most tax-efficient way of working for contractors, even more so next year, when the personal allowance increases to £11,500, which will save every client £100 per year (not much, we know, but it all adds up)
Second, that we will make managing the changeover simple and straightforward so there won’t be any nasty surprises lying in wait when the first dividend tax payments are due in January 2018.
We will update everyone’s bookkeeping by the end of this month so you can start budgeting for the change now. That’s a promise.
For more information about the dividend tax, see Bryan’s guide to it here and for more information on the budget, see last month’s “It’s Not ALL Bad News for Contractors!” blog here.