It was announced by Chancellor Phillip Hammond in today’s budget that the tax-free dividend allowance is to be cut substantially from 5,000.00 to 2,000.00.

The cut, which is to come in to force on April 2018, is the single largest revenue raising measure of Chancellor Phillip Hammond’s spring budget and was plainly targeted at directors and shareholders of small private businesses.

Traditionally, directors and shareholders have taken advantage of the option to remunerate themselves by issuing dividends out of the company’s distributable profits. The tax-free dividend allowance could be used in addition to any other tax-free allowances also permitted, meaning that there was no tax to pay on the first 5,000.00 received by way of dividend, irrespective of what other income the individual may be receiving.

It is anticipated that the cut will raise an estimated 930million by 2021-22 for the Treasury and may prompt directors and shareholders to re-think their remuneration strategies when it comes to extracting profits from their company’s.

If you would like to discuss your business, please don’t hesitate to contact the corporate commercial team at Ellisons.