Taxes: Britons to pay extra £590 from next month in Jeremy Hunt’s tax raid | Personal Finance | Finance

In his Autumn Statement last year, Jeremy Hunt announced a wave of fiscal changes to tax allowances. These have received criticism from experts as more people will get “dragged” into paying more taxes.

Mr Hunt confirmed the annual dividend allowance will be reduced from £2,000 down to £1,000 a year.

This will come into effect from April 6, 2023, which means that taxpayers only have one week to prepare for this change.

Furthermore, the annual dividend allowance will be reduced further down to £500 a year from April 2024 onwards.

On top of this, Jeremy Hunt cancelled the proposed 1.25 percent reduction on the dividend tax rates.

READ MORE: Inheritance tax expert says now is a good time to use up allowance

As such, there will be no alterations to the dividend tax rates in the coming tax year despite the change to the allowance.

A dividend is the distribution of an organisation’s earnings to the company’s shareholders which are determined by the board.

These are commonly handed out quarterly and are either paid out in cash or in the form of reinvestment in additional stock.

People do not pay any tax on any dividend income that falls within their personal allowance, which is currently £2,000.

DON’T MISS

As of next week, this allowance is being halved which means investors are more at risk of exceeding the threshold and being forced to pay tax.

Currently, the basic rate of tax on dividends comes to 8.75 percent, which is the lowest levy someone can be charged.

After this, the higher rate of tax on dividends rises significantly to 33.75 percent, with the additional rate being 39.35 percent.

As such, investors face a nearly 40 percent tax charge due to Jeremy Hunt’s new stealth tax raid.

READ MORE: Recession fears continue despite UK economy growing

The finance expert shared specifically how much extra taxpayers will need to pay as a result of the dividend allowance being reduced.

Ms Suter added: “The move to cut the tax-free dividend allowance in half from £2,000 to £1,000 from April 6 will drag many more people into paying the tax, while the further cut to £500 in 2024 will cast the tax net even wider.

“The cut will mean that from 2024 an additional rate taxpayer who has more than £2,000 of dividends at the moment will pay £590 more in tax, while a basic-rate taxpayer will face an extra £131 on their tax bill.

“In anticipation of the coming tax raid, we’ve already seen a jump in the number of customers using ‘Bed & ISA’ transactions to utilise the more generous tax allowance this year and put assets in their ISA, out of the Chancellor’s clutches.”