There is widespread confusion about how the chancellor's proposed changes to the taxation in dividends will work from 2016/17.

There appear to be two schools of thought:

1) that the new £5,000 dividend allowance will, like the savings allowance, be part of the basic rate band, or

2) that the dividend allowance will be in additition to the basic rate band, this has been mooted by Rececca Benneyworth, writing in the ICAEW tax faculty.

See our worked examples in Summer Budget 2015: Dividends 

Both of these give different answers, however both will have highly adverse affects not only for small business owners and family companies but also for many investors.

The new rules will, it is presumed, be published in detail ahead of this autumn with other draft legislation proposed for the 2016 Finance Bill. 

The Finance Bill 2015 was published on 15 July 2015.

Comment

We do not wish to show any political bias on this webservice, however we cannot help but suggest that family business owners may wonder how exactly the new tax fits in with the Conservative Pary's manifesto which proudly exclaimed "We've come a long way from Labour's policies of higher taxes and more regulations, which cost business owners billions of pounds." Perhaps the unexpected election victory paved the way for a U-turn. Maybe the government does not like small companies after all?

Petition against dividend tax

A petiton has apparently been set up against the dividend tax. It is here (noting that no donation is in fact required to this petition, although it asks for one)

Conservative Manifesto extract:

"The Conservatives are helping create jobs so hardworking people can get on in life.

By backing small businesses and enterprise, we have helped create 1.9 million new jobs - that's more people taking home a pay packet each month and being able to provide for their families.

We are on the side of small businesses, and are helping them however we can:

Same Old Labour

We've come a long way from Labour's policies of higher taxes and more regulations, which cost business owners billions of pounds.

Labour's plans for more taxes will hit businesses all over again and put thousands of jobs at risk.

Only the Conservatives have a plan to help small businesses and enterprise and create jobs."