Tax Systems Share Discussion Threads

[florenceorbis] 19/11/2022 11:23

UK Capital Gains Tax Changes Deal Heavy Blow To Investors

By City A.M - Nov 18, 2022, 2:30 PM CST

The Chancellor has slashed the exemption amount for capital gains tax and cut the dividend allowance in half today in a move that will strike a “heavy blow” to the UK’s entrepreneurs and investors.

In the Autumn statement, Jeremy Hunt said the government would cut the dividend allowance from £2000 to £1000, with a further 50 percent cut due to come from April 2024, meaning that investors will now pay tax on dividends at a rate depending on their wider income.

Entrepreneurs who pay themselves via dividends are also set to be hammered by the measures announced by Hunt today. 

A cut in the Capital Gains Tax threshold from £12,000 to £6,000 meanwhile is set to hit those with their cash outside ISAs and pensions tax wrappers, who will now pay a higher tax rate on their returns.

Analysts say the dividend tax cut would choke off investment and dampen returns at a time when ministers should be encouraging investors to back UK firms. 

“A dividend tax that kicks in at just £500 of earnings by 2024 could disincentivize investing at a time when it is really needed to help the economy grow, and for millions of investors who are looking to do more with their money to stay ahead of the pernicious effects of inflation,” said Sam North, analyst at trading firm eToro.

He added that slashing the allowance could lead to “unexpected outcomes” like people putting more money away from “typical FTSE income paying stocks to other growth focused – and typically riskier – investments elsewhere.”

Analysts at Bowmore Asset Management said that the changes to capital gains tax and dividends were a “double whammy” against investors.

“Whilst 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,” said Charles Incledon, client director.

“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. Bad news considering that we have a cost of living crisis at the moment.”

By City AM

[waldron] 18/11/2022 20:02

Frank Prenesti
Sharecast News
18 Nov, 2022 14:52
Britons face decades of high taxes after govt 'own goals' - IFS

People 'just got a lot poorer' after Hunt's budget hikes taxes, cuts spending


Britons will face “several decades” of high taxes as a result of “own goals” on economic policy by successive Conservative governments, an influential think tank said on Friday.


Responding to Finance Minister Jeremy Hunt’s autumn budget containing £55bn of tax rises and public spending cuts, the Institute for Fiscal Studies (IFS) said the UK had “just got a lot poorer”.

Living standards will fall by 7% to their lowest levels since records began – wiping out eight years of growth in the process as wages fall well behind surging inflation and interest rates.

In stark terms, real disposable incomes will be at 2013 levels, according to the independent spending watchdog the Office for Budget Responsibility.

“Our tax burden is going to settle at its highest level in history. Post-election spending plans are actually pretty austere, that’s a pretty nasty place to be, high borrowing, high debt, high tax and public spending under strain,” said IFS director Paul Johnson.

“How are all of those things consistent with one another? Part of the answer to that lies in the fact that we all got just a whole lot poorer.”



He added that the “extraordinary” scale of expected spending on debt interest – forecast to double at £100bn a year by 2027 – would also inhibit growth.

Hunt admitted on Thursday that the UK was already in a recession that is expected to last more than a year and reduce economic output by 2%.

He also gambled on the government’s electoral chances at the next election, due in 2024, by deferring austerity spending cuts for after any expected poll.

Johnson said he would be “most surprised” if the tax burden fell to long-term, pre-Covid averages “any time in the next several decades”.

“Higher taxes, a bigger state look to me to be here to stay. Beyond the next two years, all the spending numbers should be taken with a very large pinch of salt, after all they are pencilled in for after the next election,” he said.

“If they are kept to, they will mean cuts…to most public services. I have to say that it’s unlikely that they will actually be kept to. I would be willing to wager quite a considerable sum that spending will turn out higher than planned. It literally always does.”

Johnson said “slashing̶1; investment spending after the bank-induced financial crash of 2008 by then finance minister George Osborne – the architect of austerity measures that are forecast to last a generation – was “not a good way to get growth.

“Very clearly Brexit was an economic own goal….economically speaking that has been very bad news indeed and continues to be bad news, particularly the way that we’ve done it, the hard Brexit…distancing ourselves from the (EU) single market.”

Reporting by Frank Prenesti for Sharecast.com

[goatherd] 18/11/2022 18:57

The most tax efficient technique is to use ISAs as much as possible.(£20k per year per person).

For AIM shares held for more than two years there is no Inheritance Tax.

Spread betting bets are exempt from all taxes. But they cost up to 10% per year (better than 20% or 40% or 45%) so no good for dividend shares. Also no relief for losses. And 10% is better than 405 or 45%.

[the chairman elect] 18/11/2022 08:20

Post yesterdays UK Budget what are the most tax efficient investments for both Non Tax Payers as well as Basic Rate Taxpayers?

GILTS v CORPORATE BONDS v DIVIDENDS v Other Income Streams?

All comment/feedback/thoughts etc....most welcome!

[florenceorbis] 17/11/2022 15:00

Autumn Statement 22: 'Double whammy against investors' with hit on dividend and CGT allowances
Employers' NICs threshold frozen
Valeria Martinez

17 November 2022 • 2 min read

The government is halving the dividend tax allowance, Chancellor Jeremy Hunt has announced, falling from £2,000 to £1,000 next year and to £500 from 2024.

The dividend allowance was introduced to help savers in 2017, explained Shaun Moore, financial planning expert at Quilter. Having initially been at £5,000, it has been frozen at £2,000 for the past five years, which covered the majority of savers' dividend income.

The Chancellor's move will mean more people end up paying tax on their dividends, he said.

"For a basic rate taxpayer, the reduction in the dividend allowance to £1,000 will mean they will end up paying £87.50 more in tax. Similarly, if you are a higher rate taxpayer this rises to £337.50 more in tax and £393.50 if you are an additional rate taxpayer. From April 2024, a basic rate taxpayer will pay £123.75 more, increasing to £506.25 and £590.25 for a higher rate and additional rate taxpayer respectively."

Delivering his Autumn Statement at the House of Commons today, Hunt also said the annual capital gains tax exemption will fall from £12,300 to £6,000 next year, and then be cut to £3,000 from April 2024.

"The cut in the dividend allowance and Capital Gains Tax threshold is a double whammy against investors," said Charles Incledon, client director at Bowmore Asset Management.

"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. Bad news considering that we have a cost of living crisis at the moment," he added.

Autumn Statement 22: Government unveils £13.6bn package to support business rates payers

Think tank Capital Economics had said that another possible measure would be raising the dividend tax rate by 1.25 percentage points across all three tax bands, but Hunt did not confirm this in his speech.

The chancellor also announced the government will freeze the employers' NICs threshold until April 2028. However, it will retain the Employment Allowance at its new, higher level of £5,000.

According to Hunt, some 40% of all businesses will still pay no NICs at all. Meanwhile, the VAT registration threshold will be maintained at its current level until March 2026.

Other measures include a series of "stealth" raids on income tax. The chancellor has also lowered the threshold at which people pay the 45p rate of income tax from £150,000 to £125,140.

A month ago, Hunt, who was appointed Chancellor of the Exchequer on 14 October, ripped up the bulk of former chancellor Kwasi Kwarteng's Mini Budget, reversing nearly all the tax measures introduced in the 'Growth Plan' unveiled on 23 September.

The measures he reversed included the £6bn cut in the basic rate of income tax, changes to dividend taxes, a VAT tax break for foreign shoppers and a freeze on alcohol duty.

[montyhedge] 21/10/2022 12:14

Why cal IHT should just be called Death Tax.

[la forge] 21/10/2022 12:12

Taxman rakes in record £3.5bn in IHT in just six months

By Robbie Lawther, 21 Oct 22

Increase in inheritance tax receipts ‘will be music to the ears’ of the Treasury


UK taxman HM Revenue & Customs (HMRC) data has revealed that inheritance tax brought in £557m ($621m, €635m) in September 2022.

It takes the overall tax-take to £3.5bn in the first half of the 2022/2023 tax year – a new record that far surpasses the previous high of £3.1bn recorded in H1 2021/22, and the £2.9bn in H2 2021/22.

Inheritance tax surpassed £6bn in 2021/22 for the first time ever with the current tax year now set to post consecutive all-time high tax-takes.

Stephen Lowe, group communications director at retirement specialist Just Group, said: “It is no surprise that inheritance tax continues to rake in ever-increasing receipts for the Treasury. Frozen thresholds and soaring property prices that added £1bn of housing wealth every day to the estates of over-55 homeowners since the start of the pandemic have combined to tip more estates into paying IHT.

“The nil rate bands – the size of the estate that can be left without paying any inheritance tax – are due to remain frozen until 2026 and with government scrabbling to fill a fiscal hole, the likelihood of any increase in IHT thresholds before then seems vanishingly small.

“It is another reminder of the importance that people regularly assess the full value of their estate so they get a clear picture of whether IHT will affect them and understand what steps they can take to mitigate it. For some people, options such as lifetime mortgages could be an opportunity to unlock a portion of their wealth tied up in bricks and mortar.

“Passing on this wealth through ‘living inheritances’ allows people to see the benefit for recipients particularly if it helps loved ones through the current cost-of-living crisis, and it can minimise the Inheritance Tax payable on their estates.”

‘Bleak reality’

Julia Rosenbloom, tax partner at Evelyn Partners, added: “This further year-on-year increase in IHT receipts will be music to the ears of a Treasury that has a difficult task of attempting to balance the books following September’s mini-Budget.

“Given the current state of the UK economy and need to boost the government’s coffers, new Chancellor Jeremy Hunt will want to do all he can to preserve cash cows, such as IHT receipts, until stability is restored to the nation’s finances.

“Families face the bleak reality that even if the IHT regime remains unchanged in the months ahead, more people will be pushed into its scope. Frozen allowances – in the form of the nil rate ;band and residence nil rate band which have both been

[the chairman elect] 18/10/2022 08:30

Away from politics and back to why this thread exists....



Jeremy Hunt has announced that "almost all" of the tax cuts set out in the mini-Budget are being reversed.

He said: "We will reverse almost all the tax measures announced in the Growth plan three weeks ago that have not started parliamentary legislation.

"So whilst we will continue with the abolition of the health and social care levy and stamp duty changes, we will no longer be proceeding with the cuts to dividend tax rates, the reversal of off-payroll working reforms introduced in 2017 and 2021, a new VAT -free shopping scheme for non-UK visitors or the freeze on alcohol duty rates."



Not good news for our DIVI's

So can anyone explain the actual tax consequences for a basic rate tax payer as well as a higher rate tax payer?

Additionally what are the tax positions on other income producing assets such as bonds either corporate or GILTS?

From a tax perspective which income producing assets are currently the most tax efficient?

Any input on the above would be much appreciated....



SKYSHIP17 Oct '22 - 14:58 - 6576 of 6589

TCE - Zero Dividend Prefs perhaps - Income / Gain is taken as Capital Gain.

So the NBPS discussed earlier gives a YTM of only 4.73%pa (to 10/24) - but that's tax free for most perhaps.



Reckon that the tax angles will become increasingly important between the various income producing assets out there. If there are any experts out there who could give a bullet point list of Divi's, corporate bonds, GILTS, Zero's etc....it would be most useful no doubt to all.

[waldron] 23/9/2022 12:52

UK chancellor unveils biggest tax cut in generation
23/09/2022

UK chancellor Kwasi Kwarteng has slashed the top rate of income tax for the highest earners, as his mini-budget unveiled the biggest tax cuts since 1972.

The new single higher rate of tax will now be 40%.

The chancellor said that the old 45% rate for those who earned over £150,000 was higher than countries like Norway, USA and Italy.

Now, he claims the UK will have one of the most competitive and pro-growth income tax systems in the world.

Kwarteng also introduced a new basic rate for income tax of 19% from April 2023.

The corporation tax rises were also cancelled, keeping it at 19% as the government sets its sights on a 2.5% trend rate of growth.

He revealed a package of major cuts to Stamp Duty Land Tax with the nil rate band being doubled from £125,000 to £250,000.

The government is going even further to support first time buyers, who will now pay no stamp duty up to £425,000, and increasing the value of the property on which first time buyers can claim relief, from £500,000 to £625,000.

The Annual Investment Allowance £1 million has been made permanent, rather than letting it return to £200,000 in March 2023.

This gives 100% tax relief to businesses on their plant and machinery investments up to the higher £1 million limit.

In another surprise move Kwarteng said he was shutting down the Office of Tax Simplification.

And, the IR35 rules have been simplified too.

The chancellor said he was repealing the 2017 and 2021 reforms, which he said created unnecessary complexity and costs to business.

For more see:

[waldron] 03/7/2022 18:12

UK PM and chancellor announce "single biggest tax cut in a decade"

Sun, 3rd Jul 2022 11:19


(Alliance News) - UK Prime Minister Boris Johnson and Chancellor Rishi Sunak have penned a joint article to outline what they are calling "the single biggest tax cut

in a decade" in a show of unity on the cost-of-living crisis.

Writing in the Sun on Sunday, Johnson and Sunak said when the National Insurance threshold rises overnight this coming Wednesday from GBP9,880 to GBP12,570 it will save 30 million British workers up to GBP330 a year.

They added that the historic tax cut will amount to GBP6 billion in value and lift 2.2 million people out of paying "any ­National Insurance or income tax on their earnings at all", with "around 70% of British workers" paying less National Insurance.

In the rare joint op-ed from the pair, they outline the billions the government is planning to spend to cushion the blow of inflation by also providing relief for council tax bills, fuel duty and energy costs.

It comes after the prime minister's denial that his government is being "complacent" about spiralling inflation and said the "cost of freedom" is "always worth paying" amid soaring costs exacerbated by the Ukraine war.


The prime minister said there is a "big chance" to fix unnecessary cost

pressures for people and businesses across the UK.

Speaking at a press conference at the close of the Nato summit in Madrid on Thursday, Johnson said the "very, very tight labour market" and difficult "balance of our energy mix" add to inflationary pressures.

Fears are continuing to mount that the cost-of-living crisis could tip the UK into recession, as defined by two quarters in a row of falling output, as rocketing inflation sees households and businesses rein in spending.

Inflation has already reached a 40-year high of 9.1% and is set to rise past 11% in the autumn.

Bank of England Governor Andrew Bailey said on Wednesday that soaring inflation will hit Britain harder than any other major economy during the current energy crisis and that output is likely to weaken earlier and be more intense than others.

New HM Revenue & Customs figures showed that some 6.1 million taxpayers are projected to be paying income tax rates at the higher rate of 40% or the additional rate of 45% in 2022-23.

By Alana Calvert and Sophie Wingate, PA

source: PA

[waldron] 12/5/2022 07:58

Aol.


‘Wake-up call’ for pension holders as thousands face potential tax charges


Press Association

Vicky Shaw, PA Personal Finance Correspondent

12 May 2022, 6:00 am

Thousands of pension savers potentially face tax charges as they have more than the lifetime allowance sitting in their personal pensions, figures indicate.

Around 2,300 people have been paying into personal pension schemes exceeding the lifetime allowance of £1,073,100, according to HM Revenue and Customs (HMRC) data.

InvestingReviews.co.uk obtained the figures from HMRC following a freedom of information (FOI) request.

The figures also show that around 100 people have been actively contributing into funds worth £4 million-plus.

The data covers the tax year ending April 2020 and specifically covers active contributions being made into certain pensions during that tax year, so the figures will not be fully complete.

The lifetime allowance is the maximum amount of pension saving subject to tax relief that a person can build up over their lifetime.

The rate of tax paid on pension savings above the lifetime allowance depends on how the money is paid. It can be as much as 55% if it is taken as a lump sum.

Experts have warned that people may find themselves sleepwalking into tax charges and some may want to consider alternative savings options, such as Isas.

InvestingReviews.co.uk chief executive Simon Jones said: “These numbers should serve as a huge wake-up call for pension holders across the country.

“With the taxman poised to swoop on anyone breaching the lifetime allowance, it’s never been more important for people to plan ahead and see how they can avoid losing big chunks of their retirement pots.”

People usually pay tax if their pension pots are worth more than the lifetime allowance. They will receive a statement from their pension provider saying how much tax they owe.

The amount that counts towards the allowance depends on the type of pension pot someone has, and if they are in more than one pension scheme they should factor in all the schemes they belong to.

In some cases, savers with funds above £1,073,100 may not be subject to a lifetime allowance charge.

The lifetime allowance has been reduced over time, and people may be able to apply to protect their lifetime allowance from the reduction.

[waldron] 19/4/2022 06:40

certainly an unpleasant learning curve experience

All i can suggest is ask advice from a local expert

good luck

take care

chuckle and cheers

[pinemartin9] 18/4/2022 22:05

edit: I see that gift aid contributions can be claimed back in last year's self assessment even if made in current tax year. That's something I may investigate.

[la forge] 29/3/2022 11:56

Published in:
Investing

29th March 2022

Share dividends tax: why taking action NOW could help you avoid next week’s hike


Updated:
29th March 2022

by
Karl Talbot

Share dividends tax: why taking action NOW could help you avoid next week’s hike


A new tax year begins on Wednesday 6 April. From this date, the tax on share dividends will increase by 1.25%.

However, if you’re worried about the tax hike, don’t despair.

Here’s how you might be able to avoid share dividends tax by taking action ahead of the changes.

What is share dividends tax?

Share dividends tax applies to dividends received on shares. It also applies to any income you pocket from funds that invest in shares.

For the current 2021/22 tax year, the dividends tax rate that applies to you depends on your income.

Here’s the lowdown:

Basic rate taxpayers pay 7.5% share dividends tax

Higher rate taxpayers pay 32.5%.

Additional rate taxpayers pay 38.1%.

Importantly, you only pay the above rates on any dividends above the £2,000 dividends allowance. The allowance will remain at this level for 2022/23.

How is share dividends tax changing from 6 April?

The new tax year begins on Wednesday 6 April. From this date, the share dividends tax will increase by 1.25%. So, from 2022/23, the following share dividends tax rates will apply:

Basic rate taxpayers will have to pay 8.75%.

Higher rate taxpayers will pay 33.75%.

Additional rate taxpayers will pay 39.35%.

Again, these rates only apply to dividends you receive over the £2,000 tax-free allowance.

How might you avoid the tax hike if you act now?

Taxes aren’t often easy to (legally) avoid. Yet, share dividends tax is relatively easy to dodge for most investors.

That’s because, aside from the £2,000 tax-free allowance, the share dividends tax does not apply to investments held within an ISA.

For example, if you have a stocks and shares ISA and you earn dividends from it, they aren’t subject to share dividends tax.

This applies even if the dividends you receive are in excess of £2,000.

So, if you currently have non-ISA investments that typically return dividends over £2,000, it’s well worth considering whether to move them into a stocks and shares ISA.

This is particularly important right now, given that the new tax year will also signify the end of the 2021/22 ISA allowance.

The ‘ISA allowance’ refers to the maximum amount you can put into any type of ISA within a given tax year.

If you don’t use your 2021/22 allowance before the tax year slams shut, you’ll lose it. In other words, you can’t carry it over to the 2022/23 tax year.

So, it’s possible that if you act before 5 April, you could potentially shield up to £20,000 of your investments from share dividends tax. And then, from 6 April onwards, you can put a further £20,000 into an ISA for the 2022/23 tax year.

This will protect more of your investments from share dividends tax and could even see you avoid it altogether.


How else can you shield your investments from share dividends tax?

Aside from putting your investments into an ISA wrapper, share dividends tax also does not apply to investments held within a pension.


So, if you have retirement savings, such as a workplace pension, you might wish to consider topping this up.

Are you looking to open an ISA before the end of the tax year? If so, take a look at The Motley Fool’s top-rated stocks and shares ISAs to find the right account for you.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future.


The content in this article is provided for information purposes only. It is not intended to be, nor does it constitute, any form of tax advice.

Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Don’t leave it until the last minute: get your ISA sorted now!


If you’re looking to invest in shares, ETFs or funds, then opening a Stocks and Shares ISA could be a great choice.

Shelter up to £20,000 this tax year from the Taxman, there’s no UK income tax or capital gains to pay any potential profits.

Our Motley Fool experts have reviewed and ranked some of the top Stocks and Shares ISAs available, to help you pick.

Investments involve various risks, and you may get back less than you put in. Tax benefits depend on individual circumstances and tax rules, which could change.



Karl Talbot

Karl is a writer specialising in investing and personal finance content. He regularly contributes articles on savings, bank accounts, mortgages, and loans. He was previously a Personal Finance Writer for MoneySavingExpert.