Family businesses are likely to retain more profits within their business
rather than take the funds out and face an income tax hit.
Advisers have suggested that to avoid the new 50% income tax rate, family
businesses will keep more profits within the business to avoid paying more tax,
‘One of the consequences of Darling’s Budget is that it will encourage many
family businesses to leave surplus funds in their companies. I am not talking
about money you would want to spend on a yacht but for savings, cash that’s not
needed for personal consumption,’ said BDO Stoy Hayward’s senior tax partner
Taking money out of a company as dividends attracts a 25% income tax rate. But
when this is placed into a savings product it is then taxed at 40% for higher
rate taxpayers or 50% for those with income over £150,000 from next April.
With lower corporation tax rates, Herring said funds may be retained in the
business for investment. He warned that the taxman has in the past introduced
rules to force distribution of profits.
Does Darwin's theory apply to taxation? Colin ponders...
The UK tax gap fell in 2014-15 to its lowest-ever level of 6.5%, revealed official statistics published today
Changes to the tax system is urged to support the growth of entrepreneurs, found a report from the Grant Thornton UK, the Institute of Directors, and the Prelude Group
The EC has been instructed to draft a European Union (EU) directive authorising an EU financial transaction tax, which would apply to ten of the EU’s 28 member states