"Dividend investing has long been the backbone of the UK's equity culture. London is known globally for companies that produce reliable, often generous, income distributions. These are the stocks that anchor pension portfolios, provide stability during volatile periods, and give households a sense of long-term financial confidence. They form the very identity of the FTSE. The decision to raise tax rates on dividends by two percentage points from 2027 strikes directly at that core strength."
"Once the new structure arrives, basic-rate taxpayers will see rates move to 10.75% and higher-rate taxpayers will face 35.75%. That shift reduces the post-tax value of holding income stocks outside the confines of ISA or SIPP allowances. However, the vast majority of meaningful portfolios cannot fit entirely within those wrappers. Serious long-term investors therefore face a choice: reduce exposure, take dividends sooner, or redirect capital abroad."
"It is not just dividends that suffer. Interest income and rental profits will face a similar two-point increase across all tax bands. For savers, that means the return on cash becomes narrower. For property investors, it means lower net yield on rental income. The Treasury expects to collect hundreds of millions annually from these changes, and more than a billion from dividend taxation alone. Those figures reveal just how widely the impact will be felt."
Government Budget raises dividend, interest, and rental tax rates by two percentage points from 2027, increasing the cost of holding income-producing assets. Dividend investing forms the backbone of the UK's equity culture and anchors pension portfolios, household confidence, and FTSE identity. Higher dividend rates (basic-rate 10.75%, higher-rate 35.75%) lower post-tax returns outside ISA and SIPP allowances. Most significant portfolios cannot fit within those wrappers, prompting investors to cut exposure, accelerate dividend withdrawal, or move capital abroad. Higher taxes narrow cash returns, reduce rental net yields, and are projected to raise hundreds of millions annually, over a billion from dividend taxation.
Read at London Business News | Londonlovesbusiness.com
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