* Recent changes in the tax rules that could affect individuals, directors and shareholders of SMEs. Please note this is not a comprehensive document that includes all the changes that are introduced and should not be used as a definitive guide.

Dividend Taxation:

The tax regime for dividends has changed from 06 April 2016. This sees the abolition of the dividend tax credit, a dividend tax-free allowance and tax rates for dividend receipts.

Dividend tax allowance £5,000
Basic rate taxpayers 7.5%
Higher rate taxpayers 32.5%
Additional rate taxpayers 38.1%

The above change means, if you have dividends income above £5,000, it will be taxed at the rates provided in the table. Dividends received by pensions and ISAs won’t be affect by this change. Individuals who are basic rate tax payers and receiving more than £5,001 in dividends will have to complete self-assessment tax returns from 06 April 2016.

Travel & Subsistence Allowance:

Workers employed through umbrella companies and limited company directors who are working inside IR35 can no longer be able to claim travel and subsistence allowance and able to claim tax relief on those costs. So it is estimated the tax will mean thousands of construction and agency workers will lose an average a thousand pounds every year.

Employment Allowance:

From 6 April 2016, the Employment Allowance relief has increased to £3,000 per annum. Eligible employers can claim this allowance which reduces their Employer National Insurance Contribution bill up to £3,000. However, there is a new measurehas been introduced which restricts eligibility for the employment allowance so that companies with single director and no other employees are not eligible to claim this employment allowance and no longer be able to benefit from the allowance from 06 April 2016.