Contractors backed by Dragon’s Den success over dividends
Neil Westwood, an entrepreneur who won backing from Theo Paphitis and Deborah Meaden when he appeared on Dragon’s Den, has used his recently-found fame to put pressure on policymakers to reduce the rate of dividend tax payable after changes due to take effect in April.
Mr Westwood believes that the new dividend tax rate should be halved in order to ensure that micro-businesses are not unduly affected by the negative impact of the 7.5 per cent tax rate. He wants the government to consider reducing the tax rate to 3 per cent for the country’s smallest businesses in order to ensure that they are able to operate effectively once the changes take effect.
These comments were made in an interview with the Mail on Sunday, but are obviously well supported by the 47,870 signatories of an online petition which will have to be debated in parliament if it reaches 100,000 signatures.
Mr Westwood believes that David Cameron and George Osborne would never have introduced this level of tax had they had experience of running their own businesses, and whilst he acknowledges that there may be some merit in increasing tax for larger businesses, he believes small ones will suffer.
Currently, basic rate taxpayers pay no additional tax on any dividends they receive but come April the introduction of a £5,000 threshold above which dividends will be taxed. While it will still be more efficient, in most cases, for contractors to take a smaller salary and top up their income with dividends, the changes to the way the system works could make these less significant.
This is, of course, unless Neil Westwood and the tens of thousands of people who support his position are able to sway the government’s decision and get enough signatures on their petition to have the matter debated in parliament.
If you are a contractor and want to know more about how to organise your finances, our guide to the advantages and disadvantages of a limited company could help. We also have a handy take-home pay calculator and a guide to contractor tax which could help you to keep your finances on track.
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