Incorporation following Budget 2017 – still the way to go?
14 March 2017 13:55
Over the last few years, the overall tax benefit of incorporation (operating as a limited company) has been reduced somewhat.
From April 2016, the government announced dividends in excess of £5,000 will be taxed, which certainly increased the tax for many shareholders in small (usually family) businesses.
In Spring Budget 2017, it was announced the £5,000 “allowance” will decrease to £2,000 as from April 2018, which begs the question, should we still incorporate (or indeed, disincorporate)?
Although there is not one answer that will cater for all cases, there are still significant tax savings achievable operating as a limited company. The corporation tax rates are decreasing down to 17% in 2020, and additionally, national insurance rates for the self employed are increasing. These two factors will negate some of the impact the changes to the dividend rules will have.
You should also bear in mind that tax is only one consideration whether you should incorporate. Another benefit is protecting your personal assets from your business entity.
Confused? Or not sure whether a limited company is the way to go? Why not get in touch with one of our tax specialists for a FREE initial meeting?