SMEs pay out 94 per cent of profits as dividends, new research finds

04 Aug 2016

In the 2015 Summer Budget, the Chancellor outlined changes requiring SMEs to pay higher taxes on dividends. This meant that, from April 2016, those who continue to use a high dividend and low salary approach will now be incurring a much higher tax bill.

According to recent research, the changes announced in the Summer Budget have however resulted in UK SMEs paying out 94 per cent of their profits as dividends, up from 63 per cent the year before. This suggested dip in confidence meant that the total dividend payments made by UK SMEs in 2015-2016 increased to £28.3 billion, up from £17.5 billion in the previous year.

The recent uncertainty in the economy following the vote to leave the European Union may also be contributing towards this increase in profits being paid out as dividends by SMEs, with business owners taking precautionary measures by extracting extra funds to tide them over during this time of uncertainty.

The corporate tax landscape has undergone some dramatic developments over the last few years and it continues to do so. This means that targeted advice based on comprehensive research aimed at understanding your businesses and the tax rules which affect you is essential. At Beavis Morgan, we have extensive experience of providing specialist tax advice and planning to OMBs, helping them remain profitable and increase their net worth.

For more information about how we can help you and your business, please contact Paul Attridge or your usual Beavis Morgan Partner.