The chancellor is looking at increasing taxes on dividends and capital gains in an attempt to plug the £50bn hole in the nation’s finances.
Jeremy Hunt has asked officials to look at raising the dividend taxation rate as well as cutting the tax-free allowance for dividends, according to people briefed on the Treasury discussions. They said no decisions had been taken.
Under the option being modelled by the Treasury there would be a 1.25 percentage point increase in dividend taxation across the UK’s three tax bands, currently 8.75% for the basic rate, 33.75% for the higher rate and 39.35% for the additional rate.
Hunt is considering halving the tax-free dividend allowance from £2,000 to £1,000. The move would raise £455m in the next tax year.
Along with tweaks to the capital gains tax regime, the combined effect of the changes could run to the “low billions of pounds”, according to government insiders.
The Treasury declined to comment on “speculation” ahead of the Autumn Statement on 17 November.
