Shareholders and small business owners were yesterday hit by a shock tax hike on dividends as part of the plan to fund social care and the NHS.
The Prime Minister announced that dividend tax will increase by 1.25 per cent to raise an extra £600million per year.
Boris Johnson said increasing both national insurance contributions and dividend tax ‘will share the cost between business and individuals’.
Higher rate taxpayers will pay an extra £403 per year on average in dividend taxes, while investors who are basic rate taxpayers will pay an extra £150, the Treasury said.
The Prime Minister announced that dividend tax will increase by 1.25 per cent to raise an extra £600million per year
The policy infuriated small business owners, including the self-employed and contractors, who claimed they are being ‘punished’ by the Government’s ‘anti-small business, anti-start up’ agenda.
This group often choose to receive some income in dividends when their company makes a profit, rather than taking a large salary, as it is more tax efficient.
Larger shareholders were also hit, leading one critic to label the policy a ‘kick in the teeth’ for prudent savers.
But there was relief for millions of workers as the Treasury confirmed that pension funds will be exempt from the tax hike, shielding retirement savings. The changes nevertheless led to a wave of protests from small businesses and investment groups.
Mike Cherry, chairman of the Federation of Small Businesses, said: ‘Business owners who have done all they can to retain and support their staff during the pandemic are now being punished with a fresh assault on dividend revenue.’
Kitty Ussher, chief economist at
