Dividend tax rises are on the agenda

Dividend tax rates are on the radar, and it’s expected that each rate will be increased by at least 1.25%, taking the highest rate of dividend tax to 40.5% – this would mean a 10% increase in dividend taxes over the last six years.

CEO Nimesh Shah said: “Hunt and Sunak are also targeting the £2,000 dividend allowance and capital gains annual exemption of £12,300 – both could be halved increasing someone’s tax liability by over £2,000.

“The Chancellor, Jeremy Hunt, has been clear that the primary agenda is for the Government to plug the c.£50 billion hold in the country’s finances. With the UK’s tax burden at the highest level for 50 years, there are not many tax levers for the Chancellor to pull down on.

“It appears nailed on that the freezing of the personal tax allowances and thresholds will be extended until 2028. Rishi Sunak’s stealth tax, introduced in 2021, appears to be a favoured and universal means to raise tax revenue without directly increasing the headline rates. With record inflation set to run into late 2023, freezing the allowances and thresholds has an even more dramatic impact and compounds the effect of fiscal drag.

“Capital Gains Tax increases are again on the radar. It would appear unlikely that the rates would be increased now, but a pre-announced rate increase to take effect from 6 April 2024 would stimulate activity and artificially raise revenue. Pre-announcing a rate increase also gives the opportunity to reverse the rise nearer the time, if circumstances allow.

“Finally, the non-domicile tax regime will come under the spotlight following the controversy around Akshata Murty’s tax affairs earlier in the year. The Prime Minister is likely to resist the pressure to make any changes now, but he may announce a consultation to review the rules with a future change in mind – essentially kicking the can down the road.

“This Budget will set a tone at the other end of the spectrum to what was seen in Kwasi Kwarteng’s first and only Budget statement – the country should not expect any tax giveaways.”

Would you like to know more?

If you have any questions about the Government’s announcement and how it may impact you, please get in touch with your usual Blick Rothenberg contact or Nimesh Shah using the details on this page.

You can also visit our Budget Hub, where you can find our commentary and a range of insights to help you better understand how the Budget may affect you.