Reduction of Dividend Allowance?

talexuser

I just saw a headline of a reduction in the shareholder dividend allowance from £5000 to £2000? Presumably this applies to everyone and is unravelling Osborne's policy after only one year?

Ho Hum, I just bought my first unwrapped ITs last April designed for dividends of just below 5k.

jimjames

Just seen that too. S&S ISA still worth having I think. As you say it's a surprise that it's dropped so quickly after introduction.

ColdIron

talexuser wrote: »

Ho Hum, I just bought my first unwrapped ITs last April designed for dividends of just below 5k.

Same here. Still 7.5% is better than 20%

Full document here, section 1.3 and 4.3
https://www.gov.uk/government/publications/spring-budget-2017-documents/spring-budget-2017

Sceptic001

Budget 2017: Tax free dividend allowance slashed from £5k to £2k

Now that is a proper use of the word slash

BLB53

Not a problem...just be sure to hold in a S&S ISA - allowance going up to £20K from April.

bowlhead99

Yes, I wasn't watching the live announcement but BBC and various other sources have the headline.

Government and media had previously noted how the proliferation of personal service companies controlled by owner-directors (especially in consulting, technology, accounting, law, media etc) was eating into the tax take by people earning inside companies with low corporation tax and low div tax, and "gaming the system" a bit. Eliminating a further chunk of the dividend allowance will claw more back from them.

But will hurt those entrepreneurs and "genuine investors" fortunate enough to be high rate taxpayers and having to pay 30%+ on their divs rather than the token 7.5% rate for basic rate payers.

As you can wrap £100k of equities within five years of ISA allowances these days it is not a massive problem for most people, but will hurt the small business owners where the forthcoming corporation tax reductions don't cover the extra taxes on what is effectively a return on capital at risk and unable to be ISA wrapped.

talexuser

It is a problem if you are already maxed for ISA and pension every year, and VCTs are a little too hot for your risk tolerance.

ColdIron

BLB53 wrote: »

Not a problem...just be sure to hold in a S&S ISA - allowance going up to £20K from April.

Hard to jam a 6 figure sum into an ISA in one year especially if it's already earmarked for other investments. £20K won't take you close to the £2K threshold

talexuser

The comments so far refer to a quite substantial change to a policy after such a short length of time (only one tax year) which is unusual in so far as it upsets people's tax planning. But maybe Osborne should have thought of this in the first place and started with a lower threshold to take the temperature of how much the tax take would reduce.

A bigger embarrassment might be still the Manifesto pledge and NI.

bowlhead99

Although the £5k drop to £2k has been announced after only a year of the "new" system being implemented, it's more than a year after the current system was announced, and it is not happening for 2017/18, only the year starting April '18.

Not particularly welcome but there are other things they could have done which would affect me more. This one is unlikely to affect most, so the grumbles will be relatively muted - and generally coming from the better-off so relatively defensible from government POV.

Tougher for those running small businesses, there is a bit of relief thrown to them in relation to business rates, but not a huge amount.

le_loup

Unless you believe that savings and investment income should not be taxed at all, then a £20,000 per year ISA limit should cover 99% of the population.
If you are the remaining 1%, do you really want sympathy for a measure that was crazy in the first place?