Dividends from share holdings will be hit with an additional 1.25% tax as part of the government’s plans to tackle social care.
The increase will take the rate of dividend tax for higher-rate taxpayers to 33%. The tax is in addition to plans for a 1.25% increase in national insurance contributions, which will be used to pay for a £12bn-a-year package for the NHS and social care reform.
The increases will take the tax burden to about 35.5% of GDP by the end of the parliament – the highest level since 1948. Small businesses have called the NI increase a “tax on jobs at the worst time”.
Brokers have described the dividend tax hike as a “kick in the teeth” for savers and shareholders. The Institute of Directors accused the government of “exploiting public sentiment” at the expense of the economy.
