Commenting on the changes to tax on loans to business owners Dermot Callinan, head of Private Client, commented:
“Historically private companies could make a loan to a shareholder in preference to a dividend, which can under current tax rules be advantageous as the tax rate on such a loan is 25%, whilst a dividend could be taxed up to 38.1%.
“Today’s announcement by the Chancellor changes the company loan rate to 32.5% which brings the rate in line with the tax a higher rate taxpayer would pay on a dividend.
“In future company owners will have to consider the costly implications to making a loan to their shareholders rather than a dividend.”
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