Blow for business owners as dividends hit


Blow for business owners as dividends hit, which will hurt entrepreneurs who pay themselves this way

Help: Jenny Clark founded The Wild Times

Chancellor Jeremy Hunt was an entrepreneur himself, as he pointed out in his Budget statement three days ago. But not all the measures he announced have been welcomed by small businesses. 

Supportive measures include £13.6billion in tax cuts over the next five years and a Government-funded ‘transitional relief scheme,’ which Hunt said would benefit around 700,000 businesses and mitigate the impact of next year’s rise in corporation tax. 

Yet there were cuts to research and development (R&D) tax relief as well as a cut to the dividend allowance which will hurt entrepreneurs who pay themselves this way. 

Small business owner Jennifer Brown, 44, welcomed news that the VAT registration threshold will be frozen at £85,000 as it means she will not be obliged to pay more. She was also grateful for the rise in the Employment Allowance, which allows small firms to reduce their National Insurance contributions by up to £5,000. 

Yet the biggest impact on her firm, Pampeano, which sells handmade Argentine leather goods, is the Budget’s impact on the value of sterling. She says: ‘I import everything from Argentina, so my biggest challenge is currency exchange rates between the US dollar and sterling. October’s mini-Budget by Kwasi Kwarteng tanked the pound and slashed my earnings. I’m so pleased we’ve now got people at the top of Government who are economically savvy and can maybe pull us out of the hole we are sitting in.’

Erin Moroney, owner of healthy snacks firm Nibble, is relieved the tax credit for research and development was not scrapped, but disappointed it has been reduced. She says: ‘That tax incentive really encouraged businesses to do more research and development. 

‘So it’s going to curb the creation of more innovative products. For firms like ours, developing new products all the time, being able to claim that money back was really helpful. There’s a lot of trial and error with food science, so it’s challenging to create new products.’ 

Jenny Clark, 30, is a yoga teacher, paddleboard instructor and founder of The Wild Times which arranges nature-focused retreats across the UK. 

As Jenny is already seeing business sales slow down, she had hoped for more help with the cost-of-living crisis. ‘It does make me question whether I can keep on doing what I do,’ she says. ‘Starting a business is hard at the best of times and I don’t think the Chancellor has got a grip on inflation.’ 

Business owners who pay themselves in dividends are set to be worse off, with the reduction in the annual tax-free dividend allowance from £2,000 to £1,000 next April – and then to £500 in 2024. 

Michelle Ovens, founder of campaign group Small Business Britain, says: ‘We welcome the announcements on business rates, particularly the increase to the rates relief available for the retail and hospitality sectors. It will provide support for sectors at the front line of reduced consumer spending.’



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