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Did the Budget pay Dividends?

Yesterday’s much ‘hyped’ Budget was mainly free of surprises. It would seem that this Government have a ‘new era’ approach to disseminating information. A gradual ‘trickle down’ through media to ‘test the waters’ before the main event which usually is more politics than detail.

Having said that, we have been scouring the details available, to try and work out what areas (if any) might affect our clients.

The rise in corporation tax to 25% from April 2023 is definitely going to affect smaller businesses with profits over £250,000. Coupled up with the rise in National Insurance Employer contributions of 1.25%, and a manufactured increase in wages, these pressures could lead to tougher times for those small to medium sized employers recovering from the Pandemic.

Employees and the self-employed will also notice a pinch on National Insurance of another 1.25% and this all comes at a time when inflation continues to rise.

Our clients have experienced a good run with their portfolios throughout the recovery phase of the past 18 months.  Asset prices in general have been inflated because of the financial stimulus pumped into markets by central banks and governments around the world. This does offer some real comfort to investors now as living costs rise.

The real key take away to watch from yesterday is the increase in dividend taxes. If you are receiving over £2,000 per year in dividends from your shares or Collective Investment Account (CIA) you face 8.75% tax on the excess if you are a basic rate tax payer. This is a substantial increase from 7.5% to date. This theme continues, with higher rate tax payers being taxed 33.75% on dividends and additional rate payers being caught at 39.35%.

If you are worried about this, please don’t hesitate to contact us. We always will discuss your income tax position in our annual review meetings.

So in summary, largely the changes were already ‘out there’ in the media, but just be aware of the increase to dividends. They are still more attractive than income from property or salary.

We are here if you need anything at all. My best wishes. Darren


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