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There are few perks to running your own business and we believe that the ability to take dividends as share of profits that have already been taxed at 20%, up to the higher earners threshold, was one of the fundamental components of risk and reward for the hard working entrepreneur.
These business owners are the ones that drive growth, pay much needed taxes into the country’s coffers, and create jobs to give an income to others.
Being able to take a dividend; some of the profit business owners have worked so hard to generate, was one of the small rewards and was a real motivator to drive their business forward. However, this doesn’t mean we’re in business to take advantage of the tax regime, nor does it mean we don’t want to pay our fair share of taxes.
With other changes coming into effect, such as auto enrolment, a 10% increase in the minimum wage, the 3.5% insurance premium tax increase, and the imminent interest rate rises, this dividend tax is an attack too far on small businesses. And remember that these profits have already been taxed at 20%, so this 7.5% tax means we’re paying 27.5% tax, well above the basic rate of 20%.
Of course we’re grateful for the corporation tax reduction, but that doesn’t take place until a year after the dividend tax increase, and it’s a relatively small benefit compared to these increases.
We fear that this the thin edge of the taxation of entrepreneurs and marks a worrying change to the Government’s approach to the wealth creating, job creating army of small business owners who account for 99% of all private sector business. Many experts believe that the next moves will be to further increase taxation on dividends, ultimately forcing us onto payroll where there are absolutely no benefits at all to the business owner. This means we’d be treated like normal employees, which we really aren’t. We’re the first ones to not get paid when cash is tight, first ones to forgo holidays, days off and time with the family, and the ones putting everything at risk.
I see this as a fundamental attack on business owners and business growth. Although it’s been on the agenda for years no one saw this coming. I really didn’t think the Government would so directly attack the key driver of the economy. We have to remember as well that the long term survival rate of small businesses is too low and I wonder how many of them will be driven under by these and the other tax increases we’re facing.
We should be doing everything we can to encourage entrepreneurs to set up and grow businesses that will be the employers of the future.
And as of the 19th October, we have 32,000 signatures …!!