More than 52,000 people have signed a petition calling for a re-think over the Government’s plans to stop business owners being paid via company dividends.
The petition created by Frauke Golding says the move to change the system, which the Government says is needed to complement other tax reforms, does not take into account the risks entrepreneurs take when setting up a company.
The petition says: “This flies in the face of risk and reward for running a business and contributing to the economy. Life as a business owner means very long hours, low pay, stress, no holiday or sick pay and a life of uncertainty and worry.
“Small businesses make up 99.3% of all private sector businesses and we provide just under 50% of all private sector jobs. There is a real danger that this new tax, along with auto enrolment and minimum wages increases, will have a significant effect on those people brave enough to start up a business that could make a meaningful contribution to the economy and jobs market.”
As this blog was written, 52,002 people had signed the petition which has until February 24 to reach the 100,000 signature target to trigger a potential debate in Parliament.
Here’s the Government response to the petition:
“The Government is fully committed to supporting business and entrepreneurship. As set out at the Summer Budget 2015, the Government believes that one of the best ways to support growth and enterprise in the UK is through lower and more competitive Corporation Tax rates.
“Owners of small companies will also benefit from a range of other measures announced at the Summer Budget, including an increase in the National Insurance Employment Allowance to £3,000 from April 2016 and a permanent increase to the Annual Investment Allowance to £200,000 from January 2016. They will also pay less tax as a result of the increases to the tax-free Personal Allowance to £11,000 and to the Higher Rate Threshold to £43,000 in April 2016. We also have a commitment to go much further, taking the Personal Allowance to £12,500 and the Higher Rate Threshold to £50,000 by the end of this Parliament.
“However, it is not possible to continue to reduce the Corporation Tax rate without looking at the overall balance of the tax system, including taxation of dividends. Lowering the Corporation Tax rate without action elsewhere increases incentives for individuals to set up a company and pay themselves through dividends to reduce their tax bill (also known as tax motivated incorporation).
“Therefore the Government is reforming dividend taxation. These reforms, which will also simplify the dividend tax system, will significantly reduce the incentives for people to set up a company and pay themselves through dividends rather than wages simply to reduce their tax bill. Taxpayers and the Exchequer will now be £500 million better off as result of reduced incentives for tax motivated incorporation.
“Those who choose to work through a company continue to pay lower rates of tax than the employed or self-employed. But the reforms move the overall tax rates for the self-employed and those incorporated closer together, making the system fairer overall.”
View the petition here.
Maria Williams is a professional blogger, copywriter, and PR for small business. Visit www.wordsyoucanuse.co.uk.