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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

Why Thousands of Contractors Choose Dolan Accountancy

With over 25 years experience in contractor accountancy helping thousands of contractors, freelancers and the self employed, Dolan Accountancy has the specialist skills, 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 £105 + VAT. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost.

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 795 100 or email sophie.lewis@dolanaccountancy.com or jaime.thorpe@dolanaccountancy.com.

We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours
  • Free use of Contractor Umbrella – With IR35 Legislation changes we understand that sometimes you are required to contract via an umbrella company. We will keep your limited company ticking over, while you work margin free via our sister company, Contractor Umbrella
  • A Dedicated Accountant – Your accountant will be there for any company or personal tax advice that you require. We will never outsource work, even to internal teams
  • Free Access to FreeAgent – We offer all of our clients access to FreeAgent, free of charge
  • Free Business Banking – We have decided to waive our commission so our clients can use Tide free of charge for the first year
  • Unlimited IR35 Status Reviews – We will review all of your contracts for IR35 purposes and provide you with our professional opinion as to its status
  • Free Registered and Director’s Service Office Address – Sometimes you just don’t want your home address on display at Companies House. When you sign up to our accountancy services, we will offer the use of our address as an alternative
  • Your Business and Personal Taxation Needs – This includes Company Accounts, Director’s Personal Tax Return, VAT Returns, Payroll, Corporation Tax and Dividend advice, to name just a few
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