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Tax Notice

For 2005-2006 the basic tax free allowances for each individual are as follows:- 

Income tax £4,895
Capital Gains Tax £8,500
Inheritance Tax £275,000

In addition dividend income from owner managed companies continues to have an “effective income tax free rate”. For 2005-2006 this applies to individuals whose gross taxable income from all sources does not exceed £37,295.

With the above in mind, any businesses paying dividends and or salaries (especially to family members) should make sure that the relevant paperwork exists in support of these transactions and that the payments themselves are actually made at the correct times. The Inland Revenue is becoming more and more successful at challenging the status and timing of these payments, especially where they appear to be mere bookkeeping entries. This in turn can lead to significant increased overall tax liabilities.