Government 'plans' to increase dividends tax for business owners: Enterprise Nation's reaction

Chancellor Jeremy Hunt is planning to include another 1.25 percentage increase to dividends tax in his Autumn Statement on 17 November, according to press reports.

The Telegraph is among the publications to say that the government will hike up the tax on dividends which many business owners use to pay themselves. It is also claimed that the chancellor is considering raising the threshold under which no tax is due from £2,000 to £1,000.

The move is part of the government's effort to deal with the economic downturn and close the £50bn hole in public finances.

As chancellor, prime minister Rishi Sunak announced a 1.25 percentage rise in dividends tax to fund health and social care. The new increase would be another 1.25 on top of that.

The Telegraph said if the dividends tax allowance was cut, basic rate taxpayers would pay £87.50 more in tax with higher-rate taxpayers paying an additional £337.50 and additional-rate payers hit by a £393.50 tax rise.

The Times quoted Nimesh Shah, chief executive of Blick Rothenberg, who said the increase in corporation tax to 25% and higher dividends tax rates would result in an overall effective tax rate of 55%.

Emma Jones, founder of Enterprise Nation, said:

"Yesterday's interest rate rise seemed bleak, if predictable, but the news that in addition small businesses could be taxed on the profit they manage to make in difficult trading circumstances, is worrying.

"Our latest Barometer shows that small businesses are already reigning in their growth expectations while trying to keep up with seasonal demands by working longer hours and taking less breaks.

"The small business community tells us they now see the current economic climate as an equal challenge to that posed by the pandemic for the first time.

"They need a solid environment to restore confidence and all the support they can get to navigate the challenges of the next months in order to come out the other end into recovery. Let's not underestimate the difficulty they are facing.

"Small businesses create half (48%) of total employment. As we head into the biggest trading season of the year, small firms need a signal that they are backed by the government as this will boost their confidence to keep delivering."

Enterprise Nation members' reaction to potential increase in dividends tax

Fiona Scott, founder of Scott Media:

"As a campaigner with Forgotten Ltd during the pandemic, representing the millions of micro businesses who were left out and denied any support at all other than loans, this feels like a kick in the teeth. I'm not surprised by it at all yet for me it's another indication that Rishi Sunak and his party don't care about smaller businesses.

"We weren't all 'in it together' during the pandemic yet somehow we're all expected to be 'in it together' when it comes to footing society's bill. When will any UK government truly acknowledge the contribution the small business sector make the British economy and really help us to survive - and then thrive."

Karen Watkins, founder of Rowan Consulting:

"This is another massive blow for small business owners from Rishi Sunak. During COVID we were excluded from any support due to being a perceived “fraud risk”, leaving many of us struggling to retain staff and keep the lights on.

"Now just as we're finding our feet, we have this news. It will now serve the new government well amongst the small business community, I personally think it's time for general election."

Catrin MacDonnell, entrepreneurial business mentor and coach:

"At a time when many small business owners are already seriously struggling with the cost of employing staff ( something which we should be supported to do to keep people in work), we are being hit with a rise in corporation tax and possible dividend tax.

"Why does the government insist on undermining us like this? It feels like such a slog at the moment it’s not surprising so many business owners are losing their fight and giving up."

James Chetwode, managing director of We Are Chain:

"As if it's not hard enough trying to grow a business and provide jobs in this market. Talk about being kicked while you are down. Might go into politics instead."