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Current Year Tax Rates

For 2006-2007 the basic tax free allowances for each individual are as follows:-

Income tax £5,035
Capital Gains Tax £8,800
Inheritance Tax £285,000

In addition dividend income from owner managed companies continues to have an “effective income tax free rate”. For 2006-2007 this applies to individuals whose gross taxable income from all sources does not exceed £38,335.

With the above in mind, any business’s paying dividends and or salaries (especially to family members) should make sure that the relevant paperwork exists in support of these transactions. The paperwork should comprise payslips, dividend vouchers and minutes of directors meetings at which salary and dividend rates are agreed.