Reduction in dividend and capital gains tax allowance
The Chancellor announced cuts to the amount of dividends and capital gains individuals can earn before they start paying tax. Capital gains are the profits earned from selling assets that have gone up in value, such as shares, a second home or a piece of art. Dividends are the profits paid out by limited companies to their shareholders.
In the 2023/2024 tax year, the capital gains tax (CGT) allowance will be cut from £12,300 to £6,000, whilst the dividend allowance will reduce from £2,000 to £1,000.
It’s important to maximise your investments. Pensions and ISAs allow your investments to grow without being subject to tax. The Chancellor froze tax thresholds, making pension payments more attractive, if you are saving towards retirement.
From 6th April, the threshold for paying the higher rate tax of 45% will start from £125,140 a year. Those in a higher income tax bracket will be eligible for higher tax relief on pension contributions, as the government adds tax relief based on your highest income tax rate.
Most basic rate UK taxpayers automatically receive a 25% tax credit on their net pension contributions. Eligible higher and additional rate taxpayers can claim extra tax relief through their Self-Assessment. Most individuals can invest their earnings into a Pension, up to a maximum of £40,000 a year.
It is important to assess your current investment circumstances and to seek professional expertise when required.
The information contained herein does not contain and should not be construed as tax advice. Investors should independently assess, with professional financial, tax, legal and accountant advisors, the specific financial risks and legal, regulatory, credit, tax, and accounting consequences.