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| Tax Systems | LSE:TAX | London | Ordinary Share | GB00BDHLGB97 | ORD 1P |
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| 0.00 | 0.00% | 112.50 | 0.00 | 00:00:00 |
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Tax Systems (TAX) Share Charts1 Year Tax Systems Chart |
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| 06/12/2024 | 17:05 | TAX | 1,614 |
| 27/5/2019 | 15:06 | OAPs 'cut back on food to pay council tax' | 90 |
| 30/1/2019 | 19:16 | Taxpayers will pick up bill for Ј30bn council pension shortfall | 34 |
| 08/11/2018 | 13:33 | CONSUMPTION TAX: The end of income tax cometh | 31 |
| 07/10/2018 | 12:00 | TAX Systems High Recurring Revenue & Growth Opportunities | 16 |
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Posted at 06/12/2024 17:05 by papy02 Does anyone know:If your taxable income is just under the 40% threshold, plus you have bank-interest that takes you over it, does the interest tip you into 40% tax?: a) If the interest is <£1k so within your taxfree interest allowance as a BR (20%)taxpayer, so would not be taxable if you remain a BR taxpayer, but could if you become higher rate (only £500 taxfree interest allowance). b) If the interest exceeds £1k: is the the total interest that is considered to see if you are in the 40% band or just the excess over £1k (or over £500 as the reduced taxfree interest allowance for higher rate taxpayers) As interest is the top slice of income, it would be the only thing affected afaiaa (Marriage Allowance not being used anyway). Asking for a friend (no, really!) |
Posted at 27/11/2024 21:00 by florenceorbis HMRC hikes interest rate for late tax payments - what it means for your tax billBuried in the Autumn Budget was a 1.5% hike to the interest rate charged on late tax payments. Experts say it is unfair and represents a “hidden tax rise”. We explain how it works, and how to avoid it By Ruth Emery MoneyWeek The interest rate charged on late tax payments will rise to 4% above the Bank of England base rate, the government has announced. The news was buried in a raft of revenue-raising measures in last month’s Autumn Budget. The hike will come into effect next April, meaning that if interest rates remain at 4.75%, taxpayers face a penalty of 8.75% on late payments. This is an increase from the current level of 2.5% above base rate (giving a total rate of 7.25%). HMRC says the rise in late payment interest is a way of encouraging taxpayers to pay what they owe more quickly, for example people who have submitted a tax return and are late paying their tax bill. However, Robert Salter, director at the accountancy firm Blick Rothenberg, tells MoneyWeek that the change feels like a “hidden tax rise”. He points to the fact that while the late payment interest rate is going up, there is “no equivalent change in the repayment supplement which HMRC pays to those taxpayers who have overpaid taxes and are entitled to a refund”. The repayment interest rate is 3.75% (it is usually 1% lower than base rate). This means that from April, assuming there is no change in the base rate, the late payment rate charged to taxpayers will be more than double (8.75%) the rate paid by HMRC to taxpayers (3.75%). Sian Marsden, associate director at accountants RSM, comments: “There is an increasing number of taxpayers sat waiting endlessly for HMRC to process overpayments of tax, with no means of chasing and HMRC advising that some repayments could take over a year to process. "Surely if HMRC is about to get a bigger bite of the cherry, the taxpayer should also be compensated for suffering ongoing delays?” How the late tax payment charge works Let’s say you have a £100,000 bill arising as of 31 January 2025 after filing your self-assessment tax return. According to RSM, the current 7.25% interest rate means daily interest will accrue of £19.86 for each day it remains unpaid. As of 6 April 2025, this will increase to £23.97 per day. If you only started paying the tax bill in May, and it took six months (180 days) to pay off, you would fork out £4,314.60 in interest, assuming the rate is 8.75%. If the interest rate remained at 7.25%, the total interest would be lower at £3,574.80. How to avoid the charge Taxpayers that are struggling to pay what they owe to HMRC sometimes enter a Time to Pay arrangement. These are monthly payments that cover all outstanding amounts overdue, including penalties and interest. However, with a higher interest rate coming in next April, it may not be the best option for some taxpayers to agree a Time to Pay arrangement, according to Marsden. “Some may seek financial advice to see if there are better options and interest rates available, especially if they are able to obtain lending from a bank at a lower rate than HMRC’s. Maybe this was one of the intentions behind the increase, but HMRC should be seeking to support taxpayers; the increase in the interest rate seems to contradict this. “Those in the worst financial straits, unable to secure more affordable debt, could be worst hit.” She adds that the most important thing for any taxpayer who is unlikely to be able to meet a tax bill is to engage with HMRC as soon as possible. “The 31 January deadline is approaching quickly, so filing tax returns early can mean that conversations start quickly where taxpayers are unable to pay the full debt immediately. This will stop HMRC taking further action to collect debts and could mean that current interest rates are locked in (although this is not guaranteed).” MoneyWeek has approached HMRC to find out if this is the case. Is the interest rate hike fair? It wasn’t that long ago that the late tax payment interest rate was set at 2.6%. This was when the base rate was just 0.1%. So, to jump to an expected 8.75% charge next April is a lot more severe. Salter reckons the taxpayers who are “most likely to be caught by the increased interest charge are the most honest taxpayers, who are trying to settle their taxes and are simply having to pay this – often with the formal agreement of HMRC – over a period of time”. According to Andy Chamberlain, policy director at the Association of Independent Professionals and the Self-Employed (IPSE), “the real concern is that by increasing the HMRC interest rate further, the government might be strong-arming taxpayers into accepting charges that they really should be disputing”. He explains: “Should HMRC decide you underpaid tax four years ago, the interest will accrue from then on, not when HMRC raised the inquiry or started their investigation. “If the taxpayer disputes the charge, it could take further years to resolve, and the total interest bill will be significant - even more so now that it’s been hiked to almost double figures.” Will higher interest incentivise tax avoiders to pay what they owe? Salter questions whether the change will have any effect on “delinquent taxpayers” who choose not to settle the taxes they legitimately owe to HMRC. “If individuals are clearly breaking the law – and those who can but don’t pay their taxes are acting in an unlawful manner - simply increasing the interest that they need to pay won’t, in my honest opinion, really change that behaviour,” he comments. |
Posted at 30/10/2024 20:14 by the grumpy old men UK Government confirms rise in oil and gas headline tax and investment in clean energyChancellor Rachel Reeves also confirmed £2bn ($2.6bn) for 11 green hydrogen projects, which are “amongst the first commercial-scale projects anywhere in the world”. Ed Pearcey October 30, 2024 Power Technology Rachel Reeves, the UK’s Chancellor of the Exchequer, has delivered the first Labour Party Budget Statement for 14 years, and confirmed the anticipated rise in oil and gas industry headline tax rate. The headline tax rate will rise in a few days to 78%, among the highest in the world. She also extended the tax’s application by an additional year, running until 31 March 2030. In September, the UK Offshore Energies Association (OEUK), the trade association supporting companies in the offshore power generation industry, published a letter highlighting the risks of Labour’s ‘windfall tax’ for the industry. The letter, signed by more than 40 companies, explained that the windfall tax will put thousands of jobs at risk, affect companies that are critical to the UK Government’s industrial strategy and hinder continued progress toward net-zero targets. A collaboration between the new government and the oil and gas industry is essential, argued the OEUK, for the government to realise the benefits of a homegrown energy transition that supports jobs, skills and companies in the UK. Reeves said on Wednesday the changes will make sure the “oil and gas industry can protect jobs and support our energy security”. Keir Starmer’s party came to power in a huge landslide victory, and promised to toughen the Energy Profits Levy (EPL), also known as the windfall tax, which was first introduced in 2022 following a huge rise in crude oil prices. However, prices have largely normalised since Russia’s invasion of Ukraine, leading many industry players to call for an end to the tax. The tax and allowance changes are aimed at discouraging new exploration within the UK’s oil and gas fields but are also likely to gradually reduce returns for companies operating in the sector, many of whom have been there for years and have invested hundreds of millions of pounds. The Chancellor also confirmed £2bn for 11 green hydrogen projects, which she said would be “amongst the first commercial-scale projects anywhere in the world” and would total 125MW of capacity. The projects have been on hold for almost a year while awaiting confirmation of the funding. The government also announced be a new, multi-year carbon capture and storage investment, as well as £3.4bn to increase energy efficiency in homes. However, investment and development details for Great British Energy, a body to be “owned by the British people and deliver power back to the British people”, are yet to be announced. But the government expects to allocate £100bn in capital spending on the project over the next five years. Before the election, Labour said the body will partner with industry and trade unions to deliver clean power by co-investing in leading technologies, providing more than £8bn over the next parliament. PowerTechnology |
Posted at 18/10/2024 16:30 by geckotheglorious Gov’t guidance urges public not to withdraw tax-free cash over Budget rumoursThe government’s guidance service and the FCA have updated their websites to urge people not to act rashly over their 25% tax-free pension lump sums amid rumours of changes in the upcoming Budget. The government’s money guidance service, MoneyHelper, last week updated its website to encourage the public to be cautious before making hasty decisions. The move follows many providers reporting a big uptick in pension withdrawals, particularly from tax-free lump sums, because of Budget rumours. A post on MoneyHelper reads: ‘The Labour government is set to announce its first Budget at the end of the month and, as usual, there are rumours about potential changes. ‘One of these rumours is that the 25% tax-free pension lump sum might be at risk. But nothing has officially been announced or confirmed, so there’s no need to make any quick decisions about your pension right now. ‘Importantly, this is a rumour. We’ll only find out if anything is changing (and what any start date would be) when the Budget takes place.’ The post then lists four reasons why people should not withdraw money at this stage, including tax-free growth inside a pension pot, having less money to live on in retirement, and not being able to withdraw the cash before the Budget. The post ends by urging people to consider taking financial advice before taking money from their pension. Advisers have reported a big jump in calls from clients worried they could lose their tax-free lump sum, capped at £268,275. MoneyHelper provides guidance on money and pensions. It is linked to other government-backed guidance services, including Pension Wise, which has a call line for support. |
Posted at 18/10/2024 08:35 by the grumpy old men Autumn Budget: Chancellor Rachel Reeves preparing inheritance tax raidBy: Chris Dorrell Economics Reporter Rachel Reeves is reportedly preparing an inheritance tax raid, as the Chancellor seeks to hike taxes and cut spending by as much as £40bn in October’s Budget. Although the BBC reported initially that the government has not settled on the details, the various reliefs on inheritance tax are likely to be in the firing line. Currently there is a 40 per cent flat rate on inheritance tax which applies on any estate worth more than £325,000. However, there are a range of tax reliefs which means the effective rate can often much lower. Two of the most prominent inheritance tax reliefs allow for family businesses and agricultural land to be passed on tax free. Research from the Centre for Analysis of Taxation, published yesterday, suggests that these reliefs help create big discrepancies in the effective tax rates paid by different estates. According to their research, one in six estates worth over £10m pay an effective tax rate of less than four per cent while a quarter pay close to the 40 per cent headline rate. The BBC also reported that rules around gifts made during someone’s life could be subject to change. The report suggests that if someone gave away more than £325,000 in gifts, but dies within seven years, then recipients could pay inheritance tax. Its unclear how much these measures would raise or how many more people would end up paying the tax, the BBC reported. Just four per cent of estates pay inheritance tax at the moment, although this is likely to increase on the back of increasing asset prices. The news comes as reports suggest that the Chancellor could be looking to make £40bn worth of tax rises and spending cuts in the Budget. A spokesman for the Treasury: “We do not comment on speculation around tax changes outside of fiscal events.” |
Posted at 22/8/2024 19:36 by grupo guitarlumber How Inheritance Tax works: thresholds, rules and allowancesContents Overview Passing on a home Rules on giving gifts When someone living outside the UK dies Overview Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died. There’s normally no Inheritance Tax to pay if either: the value of your estate is below the £325,000 threshold you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club You may still need to report the estate’s value even if it’s below the threshold. If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren your threshold can increase to £500,000. If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die. Inheritance Tax rates The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold. Example Your estate is worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000). The estate can pay Inheritance Tax at a reduced rate of 36% on some assets if you leave 10% or more of the ‘net value’ to charity in your will. (The net value is the estate’s total value minus any debts.) Reliefs and exemptions Some gifts you give while you’re alive may be taxed after your death. Depending on when you gave the gift, ‘taper relief’ might mean the Inheritance Tax charged on the gift is less than 40%. Other reliefs, such as Business Relief, allow some assets to be passed on free of Inheritance Tax or with a reduced bill. Contact the Inheritance Tax helpline about Agricultural Relief if your estate includes a farm or woodland. Who pays the tax to HMRC Funds from your estate are used to pay Inheritance Tax to HM Revenue and Customs (HMRC). This is done by the person dealing with the estate (called the ‘executor&rsqu Your beneficiaries (the people who inherit your estate) do not normally pay tax on things they inherit. They may have related taxes to pay, for example if they get rental income from a house left to them in a will. People you give gifts to might have to pay Inheritance Tax, but only if you give away more than £325,000 and die within 7 years. éééééééééééééééééééé When someone living outside the UK dies If your permanent home (‘domicile&rsq It’s not paid on ‘excluded assets’ like: foreign currency accounts with a bank or the Post Office overseas pensions holdings in authorised unit trusts and open-ended investment companies There are different rules if you have assets in a trust or government gilts, or you’re a member of visiting armed forces. Contact the Inheritance Tax helpline if you’re not sure whether your assets are excluded. When you will not count as living abroad HMRC will treat you as being domiciled in the UK if you either: lived in the UK for 15 of the last 20 years had your permanent home in the UK at any time in the last 3 years of your life Double-taxation treaties Your executor might be able to reclaim tax through a double-taxation treaty if Inheritance Tax is charged on the same assets by the UK and the country where you lived. |
Posted at 14/3/2024 15:49 by mcunliffe1 I learned something today that may be useful to some of you on here - or your friends, relatives etc.I rang HMRC to query why more tax had been deducted from my recent Pension draw-down lump sum than I expected. Turns out Month1 was used to tax me. My code 1257L implies I can earn £12,570 a year before I'm taxed. That's £1,047.50 a month. Some weird maths at HMRC caused most of my draw-down to fall in the 20% range and some in the 40% - overall, they taxed me just over 26%. This logic somewhat negates the benefit of my making a draw-down in the last month of a tax year. Next, as I am in receipt of my wife's 10% Marriage Tax Allowance transfer I have £1,257 extra tax allowance - she has the same lower allowance. I had thought I should return this back to her after 5th April 2024 to ensure she remains untaxed on her state pension in 2024/2025 tax year. Wrong! Had I left this 'return' to April 6th it would have been implemented only in the FOLLOWING tax year of 2025/2026. So, the HMRC agent returned the transfer allowance today as it will then be implemented in 2024/2025 year but still apply for THIS yax years calculation. Next, I'd assumed that as HMRC has no PAYE system for the state pension each pensioner being paid more than the £12,570 or in the event they are the gifter of the Allowance Transfer, £11,313 - they would be required to submit a self-assessment. Wrong! HMRC calculates the total amount they pay in pension, compared to the allowance the receiver has and writes to such people who owe them tax stating the amount due. The person is expected to mail a cheque or pay online. No self-assessment and no penalty letters. It was worth the 44 minute wait to speak to the very helpful HMRC lady. Thought some of you may also benefit from these findings. Cheers! |
Posted at 01/4/2023 06:39 by waldron Frozen taxes set to raise £25bn by 2027-28, says think tank1 April 2023, 00:04 High inflation has pushed up the projected revenue take from the Government’s personal tax threshold freeze, the Resolution Foundation said. High inflation has pushed up the projected revenue take from the Government’s personal tax threshold freeze to £25 billion by 2027-28, according to a think tank. With the 2023/24 tax year starting on April 6, the Resolution Foundation analysed the personal tax and benefit changes taking effect. Its report said: “Perhaps the most important piece of personal tax policy in 2023-24, though, is the decision not to raise the starting point for income tax and personal national insurance, nor the higher rate threshold. “These remain frozen at £12,570 and £50,270 respectively, and are set not to rise before April 2028. “If the usual CPI (Consumer Prices Index) uprating had happened this April, then those thresholds would be rising by 10.1% to £13,840 and £55,340. Perhaps the most important piece of personal tax policy in 2023-24, though, is the decision not to raise the starting point for income tax and personal national insurance, nor the higher rate threshold Resolution Foundation “For a basic-rate paying employee, that change would have been worth just over £400 (including national insurance, or £250 without), while a higher-rate payer would have gained over £900 overall.” The report looked at the potential difference to revenue from income tax and national insurance, if the two main tax thresholds went up in line with inflation each year, rather than being frozen. It said: “The six-year freeze as a whole is now projected to raise £25 billion in 2027-28.” Many benefits and the state pension are rising by 10.1% in the new tax year. More than eight million households receiving means-tested benefits will also benefit from enhanced cost-of-living payments in 2023-24, worth £900 over the next year. Pensioners and those receiving disability benefits will see their additional payments repeated in 2023-24 and many workers will benefit from a 9.7% rise in the National Living Wage from April. These increases will be crucial for low-income households to cover rising costs, the Foundation said. It said the average B and D council tax bill in England will rise by 5.1% in April, equivalent to £99, while low-income households that rent remain under pressure from the continued freeze of the local housing allowance. Higher-income households will bear the brunt of April’s tax changes, according to the Foundation, whose work is focused on improving living standards for those on low to middle incomes. The starting point for the top rate of income tax will fall from £150,000 to £125,140, while the dividend allowance and capital gains tax annual exempt amount are being cut. The dividend allowance is falling from £2,000 to £1,000 and then £500 next year and the capital gains tax annual exempt amount is falling from £12,300 to £6,000 and then £3,000 next year. The reduction in income tax thresholds and dividend allowance will cost the top 5% of the population £2,000 on average, equivalent to an income reduction of around 1%, the Foundation said. The myriad tax and benefit changes introduced this April highlight the challenges of such a patchwork approach to policy Adam Corlett, Resolution Foundation The Foundation said that, taken together, the tax and benefit changes taking place from April will provide significant support for lower-income households during the cost-of-living crisis. The poorest tenth of the population are set to gain £500 on average next year, compared with a loss of £100 for a typical household, and a loss of £1,500 for the richest tenth. Adam Corlett, principal economist at the Resolution Foundation, said: “High inflation has pushed up the projected revenue take from the Government’s personal tax threshold freeze to £25 billion a year – almost triple the amount forecast when the freeze was introduced.” He added: “The myriad tax and benefit changes introduced this April highlight the challenges of such a patchwork approach to policy, which relies on short-term support schemes, stealth tax rises, and an unfair council tax system. “Difficult decisions on tax and spending policies lie ahead, but policymakers should be honest with voters about the trade-offs of these decisions.” The Liberal Democrats are calling for the energy price guarantee to be cut to £1,971 and for the warm home discount and winter fuel payments to be doubled. This would be paid for through a windfall tax on the oil and gas companies and a tax on the bonuses of their senior executives, the party said. Lib Dem treasury spokesperson Sarah Olney said: “Now more than ever, hard-working people deserve a fair deal.” A Treasury spokesman said: “After borrowing £400 billion to help the country through the pandemic and (Russian President Vladimir) Putin’s energy price shock, we have had to take some difficult decisions to balance the nation’s books and to halve inflation this year. “To help families with the cost of living, we are providing £3,300 of support on average per household this year and next – funded through windfall taxes on energy profits. “For the first time ever, people can now earn £1,000 a month without paying a penny in income tax and national insurance. “Thanks to a decade of tax reform, we have taken millions out of paying tax altogether.” By Press Association |
Posted at 29/3/2022 10:56 by la forge 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. |
Posted at 07/9/2021 21:35 by waldron Published in:Investing 7th September 2021 Tax on share dividends to increase by 1.25%. Here’s what it means for investors Updated: by Karl Talbot | 3 min read Tax on share dividends to increase by 1.25%. Here’s what it means for investors The government has announced a 1.25% increase in the tax on share dividends that will apply from April 2022. The news comes at the same time as it was announced that National Insurance contributions will increase by 1.25% next year. The government says the rises will help fund health and social care in England. Both announcements are subject to a vote in the House of Commons. So if you’re an investor, what does the new tax on share dividends mean for you? Here’s what you need to know. How much tax is currently paid on share dividends? If you’re an investor, you currently get a dividend allowance of £2,000. So, if you receive dividends worth £2,000 or less, you don’t have to pay any tax on them. For dividends of more than £2,000, the amount of tax you pay depends on your income tax band. This is unless your investments are held in an ISA, in which case your dividend payments remain tax free. For non-tax-efficient investments, you must pay 7.5% tax on any dividends over £2,000 if you’re a basic rate taxpayer. If you’re a higher rate taxpayer, you must pay 32.5%, and it’s 38.1% if you’re an additional rate taxpayer. You can find more information on income tax bands on the gov.uk website. What are the changes to dividends tax? From April 2022, the government is implementing a 1.25% rise in the tax on dividends to help fund social care. Analysts expect that the move will raise up to £600 million, with the majority of payers coming from the top 10% of households. The new tax will not, however, apply to investments held within an ISA. Why has dividends tax increased? With a National Insurance hike of 1.25% also announced, many analysts feel that the dividends tax is a way for the government to show that it is keen to increase taxes on asset holders as well as those who rely on a working income. Critics of the National Insurance hike have repeatedly pointed to the fact that it will not apply to most pensioners, landlords or those living off income from assets, suggesting that only those relying on a working income face the burden. National Insurance, by definition, is also a regressive tax, meaning that an increase disproportionately impacts those on lower incomes. That’s because the amount of contributions you have to make, at a percentage level, decreases at higher incomes. However, critics of the dividend tax rise consider it a token gesture. That’s because the 1.25% rise won’t apply to investments held in an ISA. How has industry reacted? Commenting on the changes, Tom Selby, head of retirement policy at AJ Bell, says that investors should now take the time to examine their portfolios in order to ensure they aren’t inadvertently paying more tax than they need to. He explains: “The increase in dividend tax means people investing outside tax-sheltered wrappers like pensions and ISAs should review their portfolios to make sure they are making as much use as possible of their annual contribution allowances to keep their tax bills as low as possible.” Will the tax increase definitely go ahead? MPs will vote on the government’s health and social care plan, including the planned dividends tax rise, on Wednesday 8 September at 7pm. While a number of cross-party MPs do not approve of the proposals, the policy is expected to pass through the House of Commons. |
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