As you will recall HMRC radically changed the tax rates around dividend income for the 2016/17 tax year. Being six months into the new world, now is the time for your contractors to speak with their accountancy service provider to ensure that they have fully considered all of their tax planning options.
Just to recap on what the changes were, from April 2016 onwards all individuals are now able to receive £5,000 of dividends tax free, any dividends above this within the basic rate income band are now taxed at 7.5%, dividend income in the higher rate band is taxed at 32.5% and dividend income in the additional rate band is taxed at 38.1%.
The new tax rules and rate changes mean that even more contractors will now have some personal tax to pay each year. There is no doubt that a limited company is still the most tax efficient way for contractors to operate, however these changes have placed an even greater importance on your contractors to regularly review their potential liability and consider their tax planning options.
Our limited company contractors can of course review their online portal which will show their estimated tax liabilities in real time. Additionally adopting the following tax planning options may assist in minimising the tax payable:
Not all of the tax planning options will be appropriate to every contractor, which is why our dedicated accounts team is on hand to provide advice and guidance.