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March Budget Statement preview: Dividend tax reforms

by Scott Brown | Mar 15, 2016
  • On Wednesday, amidst a climate of lower than expected local and global growth, George Osborne will present the March Budget Statement. The chancellor is expected to announce some unpopular decisions regarding grants and taxes. In addition to this, changes in the way dividends are taxed will come into force on 6 April.

    Dividend tax reforms

    These reforms were outlined in the 2015 Summer Budget and will come into force on 6 April. The 10% tax credit has been replaced with a £5,000 tax free allowance. Tax bands are set at 7.5% for basic rate, 32.5% for higher rate and 38.1% for additional rate tax payers from next year.

    Possible capital gains tax reforms

    There may or not be changes to Capital Gains Tax, but opinion on this is varied and no clear confirmation has been forthcoming from Number 11 Downing Street. 

    General expectations for the March Budget Speech

    The Chancellor has been loath to be dragged into specifics as to where he will find the £4 billion needed to get the government’s books to balance by 2020. It is clear, however, that a change in the dividend tax and/or Capital Gains Tax systems will not be enough to get Britain’s finances into surplus territory in the next four years.

    In interviews over the last week, Osborne has stated that “we need to act now so we don't pay later”. Many are interpreting this to be a warning of some significant cuts to social grants, particularly grants for the disabled. 

    Pundits are also expecting tax loopholes for the wealthy to be closed, with TV stars rumoured to be a particular target of HMRC. While these kinds of predictions are not uncommon come Budget Statement time, the importance Treasury is putting on getting the books into surplus territory by 2020 may just cause drastic action to be taken.

    If you have any questions regarding the dividend tax laws, email our accounting team or call us on +44 (0) 20 7759 7553.

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