Over a quarter of SME owners plan to take special dividend pay-outs ahead of forthcoming tax rises in April 2016.
A survey by accountancy firm Moore Stephens has found that 28% of small business owners are planning to pay themselves a special dividend before April when new tax rates come in for dividends.
There will be a £5,000 tax-free allowance under the new rules but above this basic rate taxpayers will pay 7.5% on their dividend income. Higher-rate taxpayers will pay 32.5% and top-rate taxpayers will pay 38.1%.
The survey also found that 21% of small business owners plan to reduce their dividend pay-outs once the changes come into force, while 6% expect to increase dividends to maintain their net income.
Mike Cooper, partner at Moore Stephens, said: "Small business owners are moving quickly to take out money from their businesses at a lower tax rate. Providing the accumulated profits are there, it is a perfectly sensible move and undertaken in the right way is something that HMRC has absolutely no issue with. However, SME owners who do not pay a special dividend before April 6 will have missed out."
Cooper warns that the changes to dividend tax "will hit small business owners very hard" and says SME owners "should be thinking seriously now about how much of the value they have built up in their businesses that could sensibly be extracted before the April 6 deadline."
Despite the changes, Moore Stephens says that dividends remain the most tax-efficient form of remuneration for many business owners. "While the increased tax on dividends is unwelcome, it is still marginally less than the tax on earnings, even though the difference between the two has been narrowed," Cooper said.
He added: "This is going to be a tough adjustment for many SME owners. That makes it even more important that they think seriously now about whether to mitigate some of the impact that these changes will have on their income levels next year."