Investing tax-efficiently
The complex world of tax on investment
The UK tax system has grown increasingly elaborate, thanks to revenue-raising tweaks such as the freezing of many elements and multiple reforms of dividend taxation. With more changes possible from a new government, the complexities are only likely to increase.
This guide offers a brief outline of how your investments are currently taxed and future changes (or freezes) that have already been announced. Further changes could be introduced in the next. The pandemic hit government finances hard and ever since, successive Chancellors (and their Scottish counterparts) have been taking significant steps to raise revenue. As result:
- Many personal tax allowances and bands are now frozen until April 2028, despite inflation having reached over 11% in 2022.
- There was a six percentage point jump in the main rate of corporation tax from April 2023.
- Since April 2023, the starting point for additional rate tax (top rate in Scotland) has been £125,140, nearly £25,000 below the previous (frozen) level.
- In Scotland a further 1% was added to the higher and top rates from 2023/24 and another 1% to top rate in 2024/25, taking them to 42% and 48%. Scotland also saw the introduction of a new 45% ‘advanced rate’ of tax for income between £75,000 and £125,400 in 2024/25.
- The taxation of dividends is now much less generous than when the current structure was introduced in 2016/17.
- Despite cuts to national insurance announced in the Autumn Statement 2023 and Spring Budget 2024, the tax burden is on course to rise each year to a post-war high of 37.1% by 2028/29, its highest since 1948 and a full four percentage points above the pre-pandemic figure.
Expert advice is necessary if you require more information or a greater insight into how to cut your share of the growing tax burden.
