New dividend tax is an attack on small business owners and is acting against the best interests of the UK economy, warns Top 50 accountants, Bishop Fleming
A NEW dividend tax introduced in April 2016 is an attack on small business owners and is acting against the best interests of the UK economy, warns Top 50 accountants, Bishop Fleming.
Since April, any business owner wanting to take a dividend out of the taxable profits they generate in their own company faces a tax charge ranging from 7.5% to 38.1%, depending on their other income. The worst hit are people running small businesses who have suffered proportionally the largest increase, at a time when the economy should be encouraging them.
In addition, an unintended consequence of this new burden is that wealthier business owners are now leaving substantial amounts of money in their companies, to avoid paying even more tax on money that has already been taxed. This means less money is circulating in the UK economy to help boost consumer-led growth.
Bishop Fleming’s head of tax, Andrew Browne [pictured], said: “The new dividend tax creates a double whammy for the UK; it penalises the very people we should be encouraging to start and grow successful businesses, and removes money from the economy that would otherwise help to support growth.”
Browne questioned the government’s strategy: “Business owners will be asking themselves why they should be putting in the extra hours and taking the risks if they are going to be further penalised. This is surely anti-business.”
The Bishop Fleming partner said: “I would urge the new chancellor in his Autumn Statement to re-think this tax and send out a positive message to SMEs that their efforts are appreciated in boosting the UK’s enterprise culture. A cut in the tax would be really welcome to reward hard work and boost consumer demand.”