PKF is warning owners of small companies who take most of their income as dividends that the tax increases the Chancellor is considering could cost them a significant percentage of their income. PKF has developed an online tax calculator www.pkf.co.uk/divtaxcalc, which takes just a few minutes to reveal the potential cost of the most likely five ways that the Chancellor may choose to impose the increase.
For example, an owner-manager whose company makes profits of Ј35,000 in a year may take a salary of Ј5,000 and dividends of Ј25,000. If the dividends are taxed as salary, the owner would see a reduction in his income of Ј5,324 – over 15% of the company's total profits.
