In short, this means that the majority of small Ltd Co owners who take a modest salary and most income as dividends will see a hefty personal tax hike. Ignoring the £5k tax free amount, the tax rate on dividends, whatever your income level will increase by 7.5%.
There are discussions in accounting circles about the best ways to minimise the damage of this, but it’s generally accepted that it’s going to be punitive for small Company owners.
Of course a liquidation isn’t something you can do on a regular basis to keep your tax bills low, but if you have a cash rich company and perhaps:
…then this tax change may lead you to conclude that the most tax efficient route will be a solvent liquidation, as offered by MVL Online®.
An MVL enables you to get access to all the company’s cash within a few months, and to have it taxed on you at capital gains rates. In many cases entrepreneurs relief will be available (though do verify this with your accountant), meaning the tax due on extracting these funds will be significantly lower than taking dividends. You’ll normally expect to get the first ~£11k tax free (annual exemption), and pay just 10% on the rest.
Even under current rules this typically leads to significantly lower taxes than taking a large dividend. Compare this with the dividend tax rates listed further up the page and you’ll see the difference increasing further.
We’d suggest discussing our offering with your accountant, see whether it might be suitable for your circumstances. Please understand whilst we can assist with the liquidation, we cannot offer bespoke personal tax advice, your accountant would need to provide this.