Dividend allowance cut re-tabled from April

The much-disliked plan at Budget 2017 to cut contractors’ tax-free dividend allowance by £3,000 has been officially re-tabled by the government.

But unlike last week’s re-tabling of Making Tax Digital, where a delay has been put in place, the cut in the allowance will go ahead from April 2018, as planned.

The absence of a delay not only means -- in officials’ words -- that “those affected” by the cut “should continue to assume” that their dividend tax-mitigation strategies will still be needed.

It also means that there will be limited scope to debate or revise the proposal (due to raise £1billion extra by 2020), because the bill to pass it will come at a busy time, partly due to Brexit.

Chartered advisory MacIntyre Hudson is among those with such a concern, which it says is compounded by Budget 2018 likely to be held within three months of the bill.     

It added: “There is truly a concentrated period during which the September Finance Bill can be scrutinised, during a period where, no doubt, issues surrounding Brexit will be placing significant demands on the political process.”

And given that tax legislation has become “increasingly complex over recent years,” the advisory believes a rushed, replacement Finance Bill is “hardly to be welcomed.”

On the issue of timing, the government would only say that a new bill containing the provisions it dropped, including the dividend allowance cut, would be introduced “as soon as possible after the Summer recess.”

Moore Stephens agrees that the wording is code for September, probably early in the month. “But it may be deferred until October”, it said of the bill, “after the party conference season.”

That would let the government address the Tory party before a new annual overhead hits of £225, £975 or £1,143 -- what basic, higher and top rate taxpayers will lose, respectively, under the dividend allowance cut.