Dermot Callinan, Head of Private Client, comments on the changes to tax on loans to business owners.
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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