General Election 2019
With the upcoming election and the campaigns in full swing how much attention has been given to Labour’s proposals for SME’s?
Labour’s proposals for SME’s include:
- Increasing dividend tax from 7.5% to 20% where the income is lower than 50k
- Increasing Corporation tax from 19% to 21% where profits are less than 300k (the Turnover was included in the original manifesto).
- Making Capital Gains Tax payable on the sale of your business at your marginal income tax rate. This could potentially be at least 40% as opposed to the current 10%, with the tax free amount being lowered to 1k from the current 12k
Take an SME company with a single owner who is taking a small salary and dividends to reach the basic rate threshold (50k) who is currently paying £2,662 in Income tax per annum. Then look at the same scenario under the proposed changes, the annual Income tax will increase by £4,838k.
If the same company made annual taxable profits of 80k, the Corporation tax will increase by £1,600.
This would result in an annual tax increase of more than 6k which would affect business owners earning less than the originally stated no-change 80k threshold.
If it was decided to sell the business and a figure of 200k was obtained, currently the CGT would be £18,800 but with the new proposals the CGT estimated is above 89k, resulting in an increase of 70k.
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