The chancellor has unleashed sweeping tax rises, a complete opposite to the mini budget in September 2022. This blog post relates to personal finances, not macroeconomics or how we should balance government books following their recent negative effect on the economy. Here’s a quick summary to the Autumn statement released in relation to Capital Gains Tax (CGT) & dividends:
CGT
10.00% for basic rate taxpayers and 20.00% for higher/additional rate taxpayers, no changes were announced to these rates in the Autumn Statement. The CGT annual allowance for all UK taxpayers is to be reduced from £12,300.00 to £6,000.00 from April 2023, and then to £3,000.00 from April 2024.
Dividends
8.75% for basic rate taxpayers; 33.75% for higher rate taxpayers; and 39.35% for additional rate taxpayers, no changes were announced to these rates in the Autumn Statement. The annual allowance for dividends will reduce from £2,000.00 to £1,000.00 from April 2023, and then to £500.00 from April 2024.
With these changes, here are some points to consider (in no particular order):
Assuming you are a basic rate taxpayer, according to the rates effective April 24, you would therefore expect £3,750.00 of dividends and £8,750.00 of capital gains. £284.38 (8.75%) would be due on the dividends and £575.00 (10.00%) on the capital gains. An equivalent tax rate of 6.88%.
In summary, investors are penalised and will pay more tax. Sizing your investment right becomes more important within an unsheltered portfolio. But if this is managed carefully, preferably keeping all income/gains within basic rate tax, then 10.00%/8.75% taxation should not deter you from investing for the long term.
Risk Warnings:
The information contained in this article is intended solely for information purposes only and does not constitute advice. The price of investments and the income derived from them can go down as well as up, and investors may not get back the amount they invested. Past performance is not necessarily a guide to future performance.