One good piece of news for additional rate taxpayers in the 2012 Budget was the reduction in the top rate of income tax from 50% to 45%. This could make deferring bonuses and dividends worth considering

The rate reduction will come into effect from 6 April 2013 for those with taxable income that exceeds £150,000. There will be a consequential reduction, also from 6 April 2013, in the rate at which dividends are taxable at the top rate of income tax, falling from 42.5% to 37.5%

Where discretion can be exercised, it may be worth considering delaying dividend payments or deferring income or bonuses so that they fall taxable after 6 April 2013. The overall tax cost comparison, including national insurance contributions, for additional rate taxpayers is in the table below.

Bonuses        Small company dividend      Large company dividend    Sole trader/ partnership

2012/13        57.82%    48.89%    51.44%    52.00%
2013/14        53.43%    44.45%    46.53%    47.00%

Savings can be made regardless of whether the income is sourced through an incorporated or unincorporated structure. Indeed large companies - those paying corporation tax at the full rate - benefit from an additional tax saving of 1% from 6 April 2013 due to the planned reduction in the full corporation tax rate from 24% to 23%

Care should be taken to avoid deferring your income to 2013/14 if that means your total taxable income will fall in the
marginal rate band of 62% next year. This will apply to income between £100,000 and £118,41


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