Dividend income will be subject to higher taxes in the UK.
- September 2021
- 5 minutes
There will be a 1.25% increase in national insurance and an identical hike in the tax on share dividend income.
The government proposes a 1.25 percent tax increase on share dividend income, as well as a 1.25 percent increase in national insurance. The Prime Minister presented his proposed earnings tax to parliament this afternoon, after only putting the proposal before his Cabinet this morning.
Boris Johnson said on Twitter ahead of a statement to parliament that the increase in national insurance would help fill a funding gap for social care and a “catch-up programme” for the NHS.
He said in a speech to the House of Commons that a 1.25 percent “health and social care levy” would be applied to all workers earning more than the limit, including those over the state pension entitlement age. Following criticism about the unfairness of the tax rise, several Westminster reporters tweeted that the hike in the amount of tax paid on income from share dividends is to help cover the costs of the package.
Johnson claimed that the 1.25 percent dividend tax increase, when combined with the higher NI rate, would raise £36 billion for the NHS and social care. He claims that raising both NI and dividend taxation will “share the cost between businesses and individuals,” estimating that the top 14% of earners will pay roughly half of the levy revenue.
Investors and Self Employed
Investors and the self-employed will pay £600 million more in tax as a result of the dividend tax increase, with retail investors only affected if they have significant portfolios outside of a pension or an ISA, which protect dividends from tax. The government’s move comes after the tax-free dividend allowance was reduced by 60% from £5,000 to £2,000 in 2018.