Tom Elliott, Head of Private Clients comments:
Whereas last year’s focus was on property investors with a series of restrictions, which come into force next month, today saw a further tax increase for investors who receive dividends from shares, this has been a common strategy for savers who have had their income suppressed by low interest rates. The Chancellor said that the reduction in the tax-free dividend allowance from £5,000 to £2,000 is designed to target those workers who are able to arrange their contracts through a limited company. However, by applying this change to all dividend income, on top of the increase of 7.5% income tax introduced last year, this will hit many savers who have simply sought to protect their income levels. It would surely have been better to target the restriction to dividends from director/shareholder companies to achieve this stated policy aim.
There is welcome news that the introduction of Making Tax Digital has been delayed by 12 months to 2019 for those with self-employed and rental income below the VAT threshold (£83,000), though we would favour adoption of the recommendation of the Public Accounts Committee that these taxpayers are exempted from this new initiative rather than their involvement simply being deferred.