The Budget

theEnd

cells wrote: »

From what I understand its an increase in tax for everyone who receives dividends outside of a pension/ISA which on my first understanding is a bit !!!!

from the interweb

I presume the new rates are based on the dividend received, rather than the dividend+taxcredit.

Currently, at basic rate level you receive a £1 divd, the tax credit takes it up to £1.11, then you pay the 11p tax = 0% more of the £1.

At the higher rate, you receive £1 divd, the tax credit takes it up to £1.11, then you pay 32.5% = 25% more of the £1.

Now you'll simply pay 7.5% of the £1 at basic level and 32.5% of the £1 at the higher level. Quite an increase.

Slightly offset by the extra 5k allowance, plus your income will no longer include the 10% tax credit.

Soooo.... you pay an extra 7.5% on all dividend received, except the first 5k ... and you pay 7.5% [edit: it's actually 17.5%] less on about 8-9k between the tax rates as previously you hit the higher rate 5k (allowance), plus 4k (tax credit) earlier.

That's not very clear....!

kabayiri

Dynamic of the budget

What were your impressions?

I think the sheer amount of change has foxed the opposition. HH is faced with a thankless task - the main opposition party Labour are in limbo.

The commentary on Northern Powerhouse is also very clever. I think he is setting down a challenge to the SNP, to utilise their additional powers and prove themselves.

(I could be talking ball-ucks though!)

Gavin234

vivatifosi wrote: »

My 2p worth is that they will wait until the new pensions take hold and cut back on the additional funding. I can see a point in the future, probably when I get to retire, where if people haven't saved into a pension and don't have their own house get the luxury of a room in a shared house or some other very basic accommodation.

Very true, and this will be most of the population. There will be little demand for BTL, unless they are very cheap and large enough for more than one family.

kabayiri

theEnd wrote: »

...
That's not very clear....!

Well, IR35 had all the clarity of muddy water contaminated with tar on a dull day, so I guess it can't be much worse!

vivatifosi

I think people will judge the budget through the lens of how it affects them. I don't receive any benefits or tax credits, so not impacted there. I run a small business in my spare time and there will be a small impact from the way dividends are structured. As a public sector worker I know that I'll get a 1% pay rise moving forward (am top of grade in a shrinking workforce).

Overall, I thought it was a interesting budget. Other than the info that was put out beforehand, I didn't anticipate most of it and it wasn't as harsh as I expected. The political commentator on the news said that he would probably chuck a curved ball in at the end to make it hard for the opposition to respond to and he did. I like the 2 kids moving forward part of it.

Graham_Devon

kabayiri wrote: »

Notable omissions anyone ?

The rent reductions seemed to be a bit pointless. Quite a bit was made about them before the budget by the media.

1% each year for 4 years? Not going to make any difference to anything really.

Wonder if it was watered down last minute as there was much furore in the press about how it would reduce rental prices and see people pushed out of the homes.

cells

theEnd wrote: »

I presume the new rates are based on the dividend received, rather than the dividend+taxcredit.

Currently, at basic rate level you receive a £1 divd, the tax credit takes it up to £1.11, then you pay the 11p tax = 0% more of the £1.

At the higher rate, you receive £1 divd, the tax credit takes it up to £1.11, then you pay 32.5% = 25% more of the £1.

Now you'll simply pay 7.5% of the £1 at basic level and 32.5% of the £1 at the higher level. Quite an increase.

Slightly offset by the extra 5k allowance, plus your income will no longer include the 10% tax credit.

Soooo.... you pay an extra 7.5% on all dividend received, except the first 5k ... and you pay 7.5% [edit: it's actually 17.5%] less on about 8-9k between the tax rates as previously you hit the higher rate 5k (allowance), plus 4k (tax credit) earlier.

That's not very clear....!

about the same as my assumption too

I suspect this is to tax the micro companies more rather than anything to do with dividends as a whole as anyone buying shares would probably be buying in an ISA or a pension anyway and they are exempt.


So if someone currently pays themselves a wage of £10k an a divided of £25k their tax bill just went up £1,500 which is quite a substantial difference.

it hits the big earners even more. Say someone paying themselves a £1m dividend their tax bill goes up by some £75k more in tax.

I suspect one unintended consequence will be that perhaps people keep the profit in the company and then close it and pay capital gains at 10% rather than take dividends at 32.5% or 38.1%

lostinrates

vivatifosi wrote: »

I think people will judge the budget through the lens of how it affects them. I don't receive any benefits or tax credits, so not impacted there. I run a small business in my spare time and there will be a small impact from the way dividends are structured. As a public sector worker I know that I'll get a 1% pay rise moving forward (am top of grade in a shrinking workforce).

Overall, I thought it was a interesting budget. Other than the info that was put out beforehand, I didn't anticipate most of it and it wasn't as harsh as I expected. The political commentator on the news said that he would probably chuck a curved ball in at the end to make it hard for the opposition to respond to and he did. I like the 2 kids moving forward part of it.

I pretty much agree with this. I am less sure if what I gleaned from radio four on the disability allowance ( whatever we call it) was right, that new applicants also face changes. Unlike having many children, facing lifetime illness/ disability is not a choice, and it seems unjust that people falling ill / facing disability or claiming it after a certain date get less.

kabayiri

vivatifosi wrote: »

...
Overall, I thought it was a interesting budget. Other than the info that was put out beforehand, I didn't anticipate most of it and it wasn't as harsh as I expected. The political commentator on the news said that he would probably chuck a curved ball in at the end to make it hard for the opposition to respond to and he did. I like the 2 kids moving forward part of it.

It's definitely a budget with a social agenda. The Tories are on the front foot at the moment.

I wonder if we will see the emergence of Mr Osborne as a PM in waiting?

kabayiri

Graham_Devon wrote: »

The rent reductions seemed to be a bit pointless. Quite a bit was made about them before the budget by the media.

1% each year for 4 years? Not going to make any difference to anything really.

Wonder if it was watered down last minute as there was much furore in the press about how it would reduce rental prices and see people pushed out of the homes.

Perhaps it's a case of "never mind the quality, feel the width".

The sheer amount of change in the budget surprised me. It comes across as a party with a plan, even if the reality is less clear.