Even high-income self-employed people who receive income as dividends have seen their purchasing power decline after changes to dividend tax, corporate tax, and additional tax bases.
For example, an entrepreneur who makes a profit of £180,000 and withdraws this as dividends will pay £1,480 (£1,392 due to the change in the additional tax rate from £150,000 to £125,140, plus £87.50 due to the change in the tax-free dividend band); You will be at a disadvantage. 2,000 lbs. to 1,000 lbs.).
Brick Rosenberg's Joe Neal added: “With the increase in corporation tax, companies would need to make an additional £17,574 in profits to distribute the same £180,000 in dividends.”
“The reduction in tax-free dividend allowances and the additional tax rate would also make individuals a further £1,480 worse off. With inflation currently at 6.8%, the contrast is actually much worse than this.
“Although the company made 7.9% more profit, the individual's take-home pay would actually decrease by nearly 8%.”
Francesca Henry, a financial coach and founder of Money Fox, sees clients struggling with a decline in purchasing power. “Largely due to rising mortgage rates, many people are now seriously considering whether to overextend themselves financially for a home, or are better off downsizing to make it more manageable.” or not,” she said.
Creating a financial plan, such as spending all your allowance or applying for a tax break, may be one way to feel wealthy.
Justin Modray of Candid Financial Advice said: “When it comes to saving and investing, making the most of available tax deductions is a surefire way to grow your wealth over the long term. So is investing wisely and staying firm.”
He also recommends not looking at your property too often. “If the market goes down for days or weeks, you can feel even poorer and make rash and poor decisions. It's important to keep perspective.”
