UK's Dividend Tax Is Fatally Flawed And Budget Could Drag Investors Back To The 1970S
Next week's Budget could push the UK even closer to the punishing 1970s regime that once taxed investment income at 98%, warns the CEO of deVere Group, one of the world's largest independent financial advisory organisations.
The comments from Nigel Green come as speculation gathers pace that Chancellor John Healey could raise dividend tax again in his first Budget on Wednesday 28 October, with a sharp rise in the bank profits surcharge already widely tipped.
AdvertisementHe says:
Britain already taxes dividends. Since 6 April, those held outside ISAs and pensions have been taxed at 10.75% for basic rate taxpayers and 35.75% at the higher rate, with the additional rate held at 39.35%.
The tax-free dividend allowance has shrunk to GBP 500, from GBP 5,000 a decade ago.
Nigel Green continues:
Landlords and savers face higher bills too. From 6 April 2027, rental profits move onto separate property rates of 22%, 42% and 47%, with savings interest rising to the same levels. Both sit two percentage points above the rates charged on wages.
The deVere CEO says:
From 1973 to 1984, the UK levied a 15% investment income surcharge on dividends, interest and rents above roughly GBP 2,000.
After Denis Healey's 1974 Budget lifted the top rate to 83%, the highest slice of investment income was taxed at 98%. Geoffrey Howe cut that ceiling to 75% in 1979, and Nigel Lawson scrapped the surcharge entirely in 1984.
The Chancellor has reportedly ruled out raising capital gains tax, which deVere believes could leave investment income as an obvious target for a Treasury short of room. Nothing on dividends has been confirmed, and the Treasury says it won't comment on speculation.
Income inside ISAs and pensions remains outside dividend tax, which Nigel Green says makes structure more important than ever.
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