Autumn statement – Investors take stealth hit as dividend and CGT allowances cut

Posted on November 17, 2022Comments Off on Autumn statement – Investors take stealth hit as dividend and CGT allowances cut

© Reuters. Autumn statement – Investors take stealth hit as dividend and CGT allowances cut

Proactive Investors – Investors found themselves in the crosshairs of the chancellor’s news stealth tax measures with a reduction in the allowances for both dividends and CGT.
The tax-free dividend threshold is being reduced from £2,000 currently to £1,000 for the 2023 tax year and to just £500 from 2024.
Any dividend income above that level will be taxed at 33.75% for higher rate (40% income tax) payers, while basic rate payers will continue to be taxed at 8.75% on income above the threshold.
Any shareholders making profits in these difficult markets will also find those gains taxed more heavily with the current tax-free allowance from £12,300 currently to £6,000 in 2023 and £3,000 from April 2024.
For non-property gains, ie on shares, CGT rates currently are 20% for high rate taxpayers and 10% on the basic rate band.
So, for a gain of above £12,300, a person will pay an extra £1,260 from next year and £1,860 from 2024.
Rob Morgan, chief investment analyst at Charles Stanley (LSE:CAY), said: “The tax-free allowance for share dividends is to be cut from next April to £1,000, and subsequently £500.
“The dividend allowance, which is on top of the income tax personal allowance, was reduced from £5,000 to £2,000 in 2017.
“Lowering it further means more people end up paying tax on their dividends, notably those reliant on them for regular income and self-employed individuals to paying themselves via their own company.”
Charles Incledon, client director at Bowmore Asset Management, added: “The cut in the dividend allowance and Capital Gains Tax threshold is a double whammy against investors.”
“While high net worth individuals are unlikely to feel much pain from this, for many small investors that increase in tax on dividends and capital gains is going to be significant.
“Cuts to this income could cause a real squeeze on the finances of many small investors, especially those who are retired and depend on dividend income from their shares.“
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