Owner–Managers. Wait And See, Or LLP?

With the top income tax rate at 50% for those earning over £150,000, owner-managers are finding it increasingly difficult to extract wealth from their businesses without having to pay significant amounts of tax. As the Government continues to crack down on tax avoidance, the options for tax-efficient value extraction seem limited.

Income tax: an end in sight for the 50% rate?

In the recent Budget, the Chancellor gave the strongest indication yet that the marginal 50% income tax rate could be eliminated as soon as 2013. A review of the exchequer benefits of the 50% tax rate by HMRC will likely determine the outcome as to whether the rate is retained or not. Should the 50% rate be abolished, along with the 42.5% dividend tax rate (which taxes dividends at an effective tax rate of 36%), dividends extracted after abolition may be subject to an effective rate of tax as low as 25%.