Spring Budget 2017

[Maslins]

Dividends still contribute to your taxable income insofar as the tax bands are concerned, right? E.g. a 10k salary plus 1k divi maxes out your free allowance - you can't then take a 1k bonus without paying any tax.

Dividends are taxed last, so in that situation the £1k bonus would be what used up your personal allowance, then £1k divi in basic rate band but covered by dividend allowance (assuming we're talking 2016/17 so personal allowance £11k). Doesn't matter what date you took each item as long as within the same tax year.

[SpontaneousOrder]

Dividends are taxed last, so in that situation the £1k bonus would be what used up your personal allowance, then £1k divi in basic rate band but covered by dividend allowance (assuming we're talking 2016/17 so personal allowance £11k). Doesn't matter what date you took each item as long as within the same tax year.

I just saw this which I'd missed: "Dividends that fall within your Personal Allowance do not count towards the £5,000 dividend allowance."

Which is obvious I guess.
Thanks.

[SpontaneousOrder]

So now I see it like this:

8k salary + 3k divi = 0% for a total of 11k. Then 5k divi at 0% taking us to 16k.

Then for the rest of our divis, its requires 27k to take us to the higher rate threshold. So 27K at 7.5%.

[TheCyclingProgrammer]

That adds up to 51k ? higher rate starts at 43k. So 0% on 8k salary. 0% on 5k divis takes us to 13k. That means there is only 30k left at 7.5%.

Double-checked, my calculations were correct: the dividends in my first example were £3k + £5k + £35k + £7k = £50k (my example was based on a salary of £8k and £50k dividends).

Dividends still contribute to your taxable income insofar as the tax bands are concerned, right?

As a whole dividends are taxed as the top slice of your income, but the dividend allowance is applied first (i.e. the bottom slice of your dividends) therefore it only matters that your dividends are at least that much below the higher rate threshold.

8k salary + 3k divi = 0% for a total of 11k. Then 5k divi at 0% taking us to 16k.

Then for the rest of our divis, its requires 27k to take us to the higher rate threshold. So 27K at 7.5%.

That is correct and when the dividend allowance is reduced, it will be £2k at 0% and £30k at 7.5% - no effect on higher rate dividends, if you take any.

[Alan @ BroomeAffinity]

Says the almost-boiled frog

Indeed

[WordIsBond]

So if I understand this right, I think there's a weird aberration here.

Suppose one of my shareholder employees has total compensation of £47K next year. Basic rate ends at £45K, £2K dividend allowance, right?

So I'm comparing paying him £42K in salary and £5K in dividends to a £45K / £2K split. And it seems to me he does better with the latter, because with the latter, he pays no tax on his income in the higher rate band. And I do better because I pay less corporation tax.

So it sounds like I need to stop being so generous with company shares / profit-sharing, and just pay more in PAYE, so people can get their dividend allowance in the higher rate band. Because, after all, we don't want to encourage employee ownership, do we?

Stupid way to run a tax system, isn't it? If it is only £2K anyway, why not make it a proper allowance, rather than a stupid 0% rate band in the middle of people's income, which just introduces imbalances and weirdnesses? Sure, it will cost a little, but not as much as you are gaining by slashing it to £2K.

[WordIsBond]

My thoughts too. Bit baffled by all the tweets about small biz being demonised. Yes they'll mostly have a very modest tax increase, but nothing of any significance. I get the impression many were going to moan whatever, same way Labour of course saying it's a terrible budget bla bla.

Fingers crossed there's nothing hidden in the small print...

I think the small biz being demonised is not so much about the amount of tax but about the rhetoric. The whole conversation is about them being tax dodgers and not paying enough tax. Nobody is talking about what the flexible work force does for this country and this economy. And I'm not just talking about contractors, either. A huge swathe of hard-working people, a lot of them not making very much at all, just got dissed and told they aren't paying their fair share.

If they'd put up Class 4 by one percent and said it is because they've removed Class 2, you'd say that some people benefit and others are worse off. But they went further and talked about fairness. Seems a pretty clear statement to me that the government sees the small businesses/self-employed as not paying their fair share, as needing to be taxed more to discourage people from being a sole trader. Seems demonising to me. And I'm not saying that because I got stung, because I'm not a sole trader.

[TheCyclingProgrammer]

I think the small biz being demonised is not so much about the amount of tax but about the rhetoric. The whole conversation is about them being tax dodgers and not paying enough tax. Nobody is talking about what the flexible work force does for this country and this economy. And I'm not just talking about contractors, either. A huge swathe of hard-working people, a lot of them not making very much at all, just got dissed and told they aren't paying their fair share.

This is it in a nutshell. Its not about an extra £225 a year in tax. Its about the rhetoric and the suspicion that this is just the beginning of the governments attack on small businesses (self employed and incorporated businesses).

[AtW]

Nobody is talking about what the flexible work force does for this country and this economy.

The Govt wants flexible workforce so that it could be bent over.

[waitwaitwait]

I read somewhere they plan on recouping £440m from public sector contractors. I'm just thinking that'll cover some of the money the government has wasted on failed projects?!