Dividend taxation changes: does it make tax sense to incorporate?

The changes to dividend taxation mean that incorporation may no longer be the best option for some sole traders and business owner managers. Stephen Relf CTA, tax writer at CCH considers the pros and cons

For some time, the general rule has been that a sole trader will pay less tax if he/she trades through a limited company. That is not to say that the sole trader should incorporate his/her business; there are other tax and non-tax considerations, and the demands of a limited company are not for everyone. However, the tax position was relatively clear and widely understood. But that all changed on 8 July when the Chancellor announced a new regime for the taxation of dividends. In this article, I will look at the impact of the new rules on incorporations.