The Treasury is reportedly considering abolishing the tax-free dividend allowance in the Autumn Budget 2018.

The Budget itself is scheduled for 29 October 2018.

The dividend allowance was cut from £5,000 to £2,000 with effect from 6 April 2018.  Currently therefore, the first £2,000 of an individual’s dividend income is received without suffering income tax.  Anything above that threshold is then taxed according to the individual’s marginal rate of income tax.  Private business owners can use the dividend allowance to help extract profits from their business tax efficiently.

Speculation about abolishment of the dividend allowance has already prompted a backlash from the Federation of Small Businesses (FSB), which estimates the measure would raise £1.3 billion by 2022.

To discuss dividends and other means of extracting profit from your business, please get in touch with our tax team.