Whats your views on Budget 2015?

[Maslins]

"Mr Osborne says the dividend tax system is "complex and archaic". He's replacing dividend tax credit with a tax-free allowance of £5,000 of dividend income for all taxpayers.

The rates of dividend tax will be set at 7.5%, 32.5% and 38.1%."

If that's right, that'll be a reasonable blow for PSCs and indeed most small Ltd Co owners. Currently you can take ~£8k salary and ~£30k dividend without suffering personal tax. Going forward unless I've misunderstood, it'll be ~£8k salary and £5k dividends, if you still want to take £30k you'll suffer 7.5% personal tax on £25k of it = £1,875.

Might even up the whole Ltd Co vs sole trader debate, where from a tax perspective Ltd Cos have tended to win hands down in recent years. Appreciate many businesses taking on employers won't touch sole traders though.

[Wijay@WISAccountancy]

Did I just hear PSCs with a sole director as the only employee no longer qualify for the NIC employment allowance?

Correct - but if you are contractor and paying corp tax - the offset will come in on Corp Tax...

[Wijay@WISAccountancy]

"Mr Osborne says the dividend tax system is "complex and archaic". He's replacing dividend tax credit with a tax-free allowance of £5,000 of dividend income for all taxpayers.

The rates of dividend tax will be set at 7.5%, 32.5% and 38.1%."

If that's right, that'll be a reasonable blow for PSCs and indeed most small Ltd Co owners. Currently you can take ~£8k salary and ~£30k dividend without suffering personal tax. Going forward unless I've misunderstood, it'll be ~£8k salary and £5k dividends, if you still want to take £30k you'll suffer 7.5% personal tax on £25k of it = £1,875.

Might even up the whole Ltd Co vs sole trader debate, where from a tax perspective Ltd Cos have tended to win hands down in recent years. Appreciate many businesses taking on employers won't touch sole traders though.

I am not clear on this either - need to look at the full proposal...

[Dan@OrangeGenie]

Don't forget its just a proposal at this point, lets wait to see the fallout and finer detail.

[WordIsBond]

"Mr Osborne says the dividend tax system is "complex and archaic". He's replacing dividend tax credit with a tax-free allowance of £5,000 of dividend income for all taxpayers.

The rates of dividend tax will be set at 7.5%, 32.5% and 38.1%."

When does this kick in? For this tax year or next?

If that's right, that'll be a reasonable blow for PSCs and indeed most small Ltd Co owners. Currently you can take ~£8k salary and ~£30k dividend without suffering personal tax. Going forward unless I've misunderstood, it'll be ~£8k salary and £5k dividends, if you still want to take £30k you'll suffer 7.5% personal tax on £25k of it = £1,875.

Might even up the whole Ltd Co vs sole trader debate, where from a tax perspective Ltd Cos have tended to win hands down in recent years. Appreciate many businesses taking on employers won't touch sole traders though.

Sounds like it. So he's hit contractors who were using it by £2K with the employment allowance, and by another £2K on dividend tax. Not sure when those provisions take effect. In return, we get a £400 increase in the basic rate tax threshold, £715 in the higher rate threshold, next year. And in 2017 we get a 1% cut in corporation tax and another 1% in 2020.

Someone is going to have to revise their estimates on what IR35 saves the government. Another budget like this and they might as well scrap it because we won't be that much better off on tax than permies.

Did he actually say anything at all that would make IR35 better?

[jamesbrown]

Definitely need to be careful with back of the envelope calculations here, given the wide array of changes and some of the caged wording on dividends (and how it may impact close companies), among other things. It's going to take some time to understand the fallout, and there are also proposals coming forward to "simplify" IR35 and restrict relief on expenses, so the net effects could be quite profound for close companies, i.e. contractors, at least in terms of getting money out.

[TheFaQQer]

When does this kick in? For this tax year or next?

April 2016, so next tax year.

[Bunk]

Is it likely to be more efficient to take a chunk out this year, making use of the 10% credit while it's still there on the 32.5% band (meaning it's actually 25%)?

[Wijay@WISAccountancy]

Is it likely to be more efficient to take a chunk out this year, making use of the 10% credit while it's still there on the 32.5% band (meaning it's actually 25%)?

best not to jump into conclusions until we see the full report :-)

[Maslins]

Someone is going to have to revise their estimates on what IR35 saves the government. Another budget like this and they might as well scrap it because we won't be that much better off on tax than permies.

Yeah, on Twitter-sphere this does seem to have been suggested. IR35 to become borderline irrelevant because sting of it far less severe, as benefit of low salary high divi slashed.