The Lemon Fool

For info, just in case any income-investors have missed the detail on this today, there has been no change to the £2,000 Dividend Allowance in today's budget -



Source - https://www.gov.uk/government/publications/budget-2021-overview-of-tax-legislation-and-rates-ootlar/annex-a-rates-and-allowances

The above document also confirms that the CGT allowance of £12,300 has also been maintained for the 2021/2022 tax year.

Cheers,

Itsallaguess

Yes, good news.
And I'm surprised and pleased that he made no change to dividend tax rates.

It's a pretty pickle when one is surprised that a Conservative govt does not increase tax rates.

V8

I was expecting the tax rates to increase too - good news that this area has not been taxed further!

Itsallaguess wrote:The above document also confirms that the CGT allowance of £12,300 has also been maintained for the 2021/2022 tax year.

Enjoy while it lasts!

I must say, when we are able to stick £20,000 a year in ISAs to avoid capital gains taxes and dividend taxes entirely, then I think future governments will find it increasingly hard to resist the temptation to either abolish the dividend allowance of £2,000 and reduce or abolish the CGT allowance. Statistically, those able to stuff their ISAs every year are very much in the minority.

Best wishes

Mark.

ADrunkenMarcus wrote: then I think future governments will find it increasingly hard to resist the temptation to either abolish the dividend allowance of £2,000 and reduce or abolish the CGT allowance.

There might be strength in numbers. The existing limits mean that HMRC doesn't have to chase up tax on every personal holding of shares outside of SIPPs and ISAs. The privatisation campaigns are receding into the past but presumably left, as intended, a legacy of widely held small shareholdings.

The same rules would apply to funds so that's even more chasing.

ADrunkenMarcus wrote:Statistically, those able to stuff their ISAs every year are very much in the minority.

Finally, I've become a pandemic statistic for the first time. Filled the limit this year due to having nowt else to spend on.

ADrunkenMarcus wrote:

Itsallaguess wrote:The above document also confirms that the CGT allowance of £12,300 has also been maintained for the 2021/2022 tax year.

Enjoy while it lasts!

Mark.

The intention is the keep the CGT allowance to 2026 as with the income tax allowances.

This measure maintains the Capital Gains Tax annual exempt amount at its current amount of £12,300 for individuals and personal representatives and £6,150 for most trustees of settlements for the tax years from 2021 to 2022 to 2025 to 2026.

https://www.gov.uk/government/publications/maintaining-the-annual-exempt-amount-for-capital-gains-tax

mike wrote:

ADrunkenMarcus wrote:

Itsallaguess wrote:The above document also confirms that the CGT allowance of £12,300 has also been maintained for the 2021/2022 tax year.

Enjoy while it lasts!

Mark.

The intention is the keep the CGT allowance to 2026 as with the income tax allowances.

This measure maintains the Capital Gains Tax annual exempt amount at its current amount of £12,300 for individuals and personal representatives and £6,150 for most trustees of settlements for the tax years from 2021 to 2022 to 2025 to 2026.

https://www.gov.uk/government/publications/maintaining-the-annual-exempt-amount-for-capital-gains-tax

I am fine with all of that I must say. (Most of my investments are in either an ISA or a SIPP)

Dod

mike wrote:The intention is the keep the CGT allowance to 2026 as with the income tax allowances.

Yes, we have a five year nominal freeze that - if my quick guestimate is right - is a c. 9%+ cut in real terms by 2026 if we assumed 2% inflation. I would suspect further 'fiscal drag' with frozen or reduced allowances after 2026, too.

Best wishes

Mark.

ADrunkenMarcus wrote:

Itsallaguess wrote:The above document also confirms that the CGT allowance of £12,300 has also been maintained for the 2021/2022 tax year.

Enjoy while it lasts!

I must say, when we are able to stick £20,000 a year in ISAs to avoid capital gains taxes and dividend taxes entirely, then I think future governments will find it increasingly hard to resist the temptation to either abolish the dividend allowance of £2,000 and reduce or abolish the CGT allowance. Statistically, those able to stuff their ISAs every year are very much in the minority.

Best wishes

Mark.

From HMRC's viewpoint having a small tax free dividend allowance saves a lot of admin in assessing and collecting small amounts of tax from taxpayers with a few dividends. The same applies to the interest savings allowance. Having those 2 small allowances ensures that PAYE has collected the correct tax from millions of taxpayers who would otherwise have to be assessed on their small savings income.

ADrunkenMarcus wrote:....a five year nominal freeze that .....

will miraculously be lifted in 2024 when we have the next General Election.

V8

But of course the tax on dividends was, IIRC, sold as a means of getting at those that have their own businesses and take most of their income as dividends, particularly those running personal services companies.* The 6%pt increase in corporation tax may well mean that the attraction of organising things that way diminishes significantly with small company owners choosing to take salaries. If that were to happen there would be logic for a campaign to reverse the tax on dividends. But in the post Covid era that is highly unlikely I think.

* This group has also received no support during the entire Covid crisis, unlike those paid a salary.

88V8 wrote:Yes, good news.
And I'm surprised and pleased that he made no change to dividend tax rates.

It's a pretty pickle when one is surprised that a Conservative govt does not increase tax rates.

V8

Big rise in corporation tax. That's the government helping itself to the pot from which dividends can be drawn. Utterly unfit for purpose in today's world, as demonstrated be companies that successfully avoid it with international arrangements such as profit-diverting.

Wizard wrote:But of course the tax on dividends was, IIRC, sold as a means of getting at those that have their own businesses and take most of their income as dividends, particularly those running personal services companies.* The 6%pt increase in corporation tax may well mean that the attraction of organising things that way diminishes significantly with small company owners choosing to take salaries.

The attraction of dividends there is that they avoid the tax called "National Insurance". Which at 26% (14% employer + 12% employee) is higher than standard rate income tax and dwarfs all other taxes.

UncleEbenezer wrote:

Wizard wrote:But of course the tax on dividends was, IIRC, sold as a means of getting at those that have their own businesses and take most of their income as dividends, particularly those running personal services companies.* The 6%pt increase in corporation tax may well mean that the attraction of organising things that way diminishes significantly with small company owners choosing to take salaries.

The attraction of dividends there is that they avoid the tax called "National Insurance". Which at 26% (14% employer + 12% employee) is higher than standard rate income tax and dwarfs all other taxes.

* Corporation tax is not presently set the rise for such small businesses, it is to stay at 19%.

The reduction in dividend tax free allowance to 2k from 5k was stated to be because CT was to drop to 19%. With CT set to rise to 25% for all but small businesses the freezing of the DT allowance actually represents a significant rise in double taxation. (Although a lower payout may limit the DT collected in practice.)