Back in 2015, then Chancellor George Osborne, shook up the dividend taxation system, overhauling an area of economic policy that had not been touched for years. But now the present day Chancellor, Jeremy Hunt, has signalled what appears to be the death knell for the allowance as he set out plans in November 2022, to reduce it to just £500 in the 2024/25 tax year.
It’s a fair question, especially if you’re on a fixed salary. It would be easy to think that you should just receive a set amount each month based on the total salary, less tax, divided by 12 for monthly pay or 53 for weekly payrolls. But the way tax is calculated is not that straightforward and there are various factors which mean your salary will vary by month. Needless to say, the overall salary amount you get paid over the year evens out to that net figure but it won’t arrive in neat even chunks, and here’s why.
Should you take your income as salary or dividends? The question of how to draw earnings from your business when you are an owner director is a perennial one, but in recent years, successive changes in government policy have made the answer slightly more nuanced.
In 2016 dividend tax was introduced as a way of levelling up the tax system between employees, the self-employed and business directors/owners. The view of the then chancellor and his successor is that however you are employed and however much you earn, the tax system should be even handed. It was felt that whilst personal […]