You are here: Home - Investing - Experienced Investor - News -

Dividend allowance cut could hit 90,000

0
Written by:
18/07/2017
The government has reintroduced plans to cut the dividend tax break, hitting personal investors funding their retirement.

The government will reduce the tax-free allowance on dividend income from £5,000 to £2,000, resulting in an additional tax bill of £80 a month for a higher rate tax payer.

The changes will only apply to those taking dividends outside an ISA or pension wrapper, but could affect pensioners who use dividends to generate an income, or self-employed people taking dividends via a personal services company.

The Share Centre said 90,000 investors could be hit when the new legislation comes into effect in April 2018. The group’s pre-election survey of 1,000 of its customers – when asked what action the new government should take to support personal investors – found over half (53%) said it should protect the dividend tax allowance.

Darren Cornish, director of customer experience at The Share Centre, said: “This measure, like the proposed increase in Class 4 National Insurance which was subsequently scrapped, was intended to level the playing field between the employed and the self-employed. However, an unintended consequence is that it hits those who are using dividends to fund their retirement.

“A significant number of our customers have portfolios over £50,000 that are not being held within a tax efficient wrapper such as an ISA. These are not company directors paying themselves through dividends – many are pensioners who turned to investing because interest rates were so low. They could see their tax liability increase by hundreds or possibly thousands when the allowance is reduced.”

Cornish said that the lack of certainty surrounding the rules was very unhelpful for investors looking to plan appropriately. He suggested investors consider selling their investments and repurchasing them within an ISA, sometimes known as ‘Bed and ISA’. There will be costs associated with this and it may leave investors open to capital gains tax if it goes over the annual tax-free gains allowance of £11,300, so investors should proceed with caution.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

If one of your jobs this month is to get your finances in order, moving your savings to a higher paying deal i...

Coronavirus and your finances: what help can you get?

News and updates on everything to do with coronavirus and your personal finances.

Everything you need to know about being furloughed

If you’ve been ‘furloughed’ by your company, here’s what it means…

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
Five surprising things you need to tell your home insurer

If your circumstances change, it may not always be obvious whether you need to inform your home insurer. Here are...

Close