IPSE warns against a potential end to differential treatment of tax dividend

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The IPSE believes that a proposal to end the differential treatment of the tax dividend would be a major blow to self-employed workers.

In a wide-ranging review of the savings tax system, the Office for Tax Simplification (OTS) suggested one option to simplify the tax system would be to end differential tax rates for dividend income. 

Currently, dividend income is taxed at 7.5, 32.5 or 38.1 per cent, as opposed to 20, 40 or 45 per cent.

At the 2015 Summer Budget, it was announced that the Dividend Tax Credit would be replaced by the Dividend Allowance. In 2017, it was announced that the Dividend Allowance would be reduced by 60% – from £5,000 to £2,000.

The Association of Independent Professionals and the Self-Employed (IPSE) has said that the proposal of ending differential tax rates for dividend income will create nothing but uncertainty for the self-employed.

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IPSE Deputy Director of Policy, Andy Chamberlain, explained, “One of the key principles of tax policy is certainty. Businesses need certainty so that they can invest confidently without the cloud of constant regulatory change. Reviewing the taxation of dividends yet again goes completely against this principle and creates nothing but uncertainty for the self-employed.

“With HMRC currently consulting on extending IR35 to the private sector and gathering evidence to lower the VAT threshold, the last thing the self-employed need is another punitive tax grab.

“As we head through the uncertainty of Brexit negotiations, we urge the Government to stop tinkering with the tax system. Making such significant changes in such a short period of time is damaging British business rather than boosting it.”

He added, “With the self-employed contributing £271 billion to the UK economy – enough to fund the NHS twice – every year, the Government should be finding ways of supporting not stifling them.”

To find out more about contracting please contact Sophie on 01442 795 100 or email sophie.lewis@dolanaccountancy.com

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Dolan Accountancy was set up by Simon J Dolan, the man behind the well-known brand SJD Accountancy. With over 25 years experience in the contracting marketing, Dolan Accountancy has the heritage, reputation and credibility you can trust. Working closely with our sister company, Contractor Umbrella, it means we can offer one low cost, fixed fee package at £95 + VAT per month. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost. We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

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If you’d like to find out more about how Dolan Accountancy can help you and your business, please give us a call on 01442 795100 or email sophie.lewis@dolanaccountancy.com or jaime.thorpe@dolanaccountancy.com.