Budget 2017: Entrepreneurs hit by £1 billion dividend grab

Workers who incorporate as companies to avoid employment taxes face a crackdown after the dividend allowance was slashed by 60%.

From April 2018, the amount of tax-free dividends directors can pocket will fall to £2000 from £5000, giving the Treasury a £930 million boost by 2021.

“This represents a clear tax increase for all entrepreneurs who run their own company,” said Harwood Hutton’s Cormac Marum.

Half the people affected are director shareholders of private companies and the rest are investors with holdings worth over £50,000 outside ISAs, Chancellor Philip Hammond said.

He hopes to level out the amount of taxes paid between staff and incorporated firms.

“The cut in allowance will mean that a higher rate taxpayer receiving £5,000 of dividend income will now face almost £1,000 in extra tax. This will be a bitter blow for those who are relying on these savings to fund their retirement but who now find themselves as ‘collateral damage’" said EY head of tax Chris Sanger.