Tax & Accounting News

Family Firms Plan Bumper Dividends To Beat Tax Hike

26/11/2009

Some family businesses are considering doubling their normal dividend between now and next March to beat the new 50 per cent tax rate on earnings above £150,000, which comes into force on 5 April 2010.

The Daily Telegraph newspaper quoted several chairmen of family companies who were taking steps to limit their exposure to the new higher tax rates, as well as accountants who said many other companies were planning similar moves to pay dividends and staff bonuses ahead of the tax rise.

Such a move would allow family members to limit their tax liability to the current rate for dividends of 32.5 per cent, rather than the new rate of 42.5 per cent, which also comes in on 5 April.

The chancellor, Alistair Darling, is expected to announce further crackdowns on tax avoidance schemes in his pre-budget report, which is set to be delivered in late November or early December. A number of schemes have been closed down by HM Revenue and Customs (HMRC) but companies choosing when to pay bonuses and dividends is generally considered legitimate tax planning.

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