020 32 86 58 51  |  023 80 972 434

The Chancellor of the Exchequer has been urged not to ‘clobber’ small business owners by taking away the Dividend Allowance.

The Federation of Small Businesses (FSB) has expressed concern that the Chancellor will reduce the tax free dividend allowance in order to plug the funding gap in the upcoming Autumn budget.

At present, the first £2,000 of dividends that anyone receives is tax free, regardless of what tax rate they pay on the rest of  their other earnings.  This encourages Directors and Shareholders to take dividends when paying themselves. This has already reduced by 60% from the £5,000 allowance that was introduced in the 2017 budget.

The FSB is worried that the Treasury will slash this further – or eliminate it entirely – in order to net an extra £1.3bn by 2020 on top of the £2.6bn it forecasts to make from the original cut.

They say that this will discourage people from setting up their own business or investing in others doing so, something that will be all the more important after Brexit.

Chairman of the FSB, Mike Cherry  said ‘We need to back small businesses and their shareholders – not clobber them with a secret tax grab‘.

A spokesman for the Treasury said that “We keep all taxes under review” and declined to comment whether further cuts to the allowance were being considered.

Only time will tell and we will have to wait until November to see exactly what the Autumn Budget contains.