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A client queried today whether the dividend tax changes from Budget 2015 mean that reversion to self employment (schedule D) is better for small company owners?

Really its too early to say – we need to see full proposals – and there is a risk of tails wagging dogs, however a quick bit of number crunching based on current understanding of proposals shows:

Summary   – one shareholder only £ £ £ £
Profit Level        30,000          70,000        200,000      250,000
Self employed – Tax and NI          6,083          23,634          77,604      100,104
Company current          4,536          17,247          70,165        92,387
Company year 1 of dividend tax (no CT cut)          5,325          19,639          79,439      104,484
Company final version of reforms          4,966          18,837          76,899      101,520

This assumes (a) one shareholder (b) salary at PA level (c) what we know so far

At lower profit levels a company still wins.  As profit rises in the short term self employment is marginally cheaper, but the advantage neutralises or favours a company – and, of course, at those profit levels the more sophisticated planning and protection regime of a company is preferred.