Small Business Dividend Taxation
Budget Analysis 2004 Small Business - Dividend Taxation Two years ago the Chancellor announced a concession that for small businesses who made profits of £10,000 or less their Corporation Tax rate would be NIL. With effect April 1 - this concession is withdrawn and for those who elect to withdraw this nil taxed profit as a dividend it will now be taxed at 19%.
For those who elect to retain the profit in the business for investment there will still be no tax to pay.
Our view
Well it was great whilst it lasted - all those self employed people who elected to establish a limited company and use this nil tax loophole for £10,000 of tax free income - you have now been caught - you either go through the expense of converting back to being self employed or you stay as you are. We suppose even 19% is better than 22% or 40% plus the National Insurance Contributions if you were self employed. We think Corporation Tax will rise at the next budget now that he has got you all trading as limited companies - watch this space - "Mystic Mog"