Tax Changes

In 2022 the Chancellor announced in the Autumn Statement changes to Capital Gains Tax and Dividend Tax allowances. To help you understand how the changes could impact you, we’ll answer your most popular questions.

1.  What is Capital Gains Tax?
2.   Example Calculation
3.   Changes to Capital Gains Tax

4.  What is Dividends Tax?
5.   Example Calculation
6.   Changes to Dividends Tax

This information has been prepared for basic information purposes only and is aimed at UK taxpayers. The actual tax you would have to pay will depend on other income and investments and personal circumstances. This is not intended to provide, nor should it be relied on for tax advice.

Capital Gains Tax on Investments

What is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax you might owe on the gain when you sell an asset (i.e. Investment) that has increased in value.

More information can be found about Capital Gains Tax and how it works on the Government website.

Example

It’s the gain that is taxed so for example if you bought £1,000 of an investment and sold it at £20,000 then your gain would be £19,000 (£20,000 - £1,000).

Each year you have a Capital Gains Tax Allowance, in the 2023/24 year this is £6,000, which means you won’t owe tax on any gains within this allowance.

In this example, where a gain of £19,000 has been made, £6,000 would fall within the CGT allowance leaving £13,000 which would be liable for CGT.

In 2023/24 tax year a basic rate taxpayer would owe 10% (£1,300 – that is assuming your income including the gain remains within the basic rate band) and a higher rate taxpayer would owe 20% (£2,600) on this gain. 

Please note that not all investments are liable for Capital Gains Tax and there are separate Capital Gains Tax rules for selling properties which are also detailed on the Government website.

This information has been prepared for basic information purposes only and is aimed at UK taxpayers. The actual tax you would have to pay will depend on other income and investments and personal circumstances. This is not intended to provide, nor should it be relied on for tax advice.

Changes to the Capital Gains Tax Allowances

In the 2022 Autumn Statement changes were announced to this allowance which reduce it over the next two years. This has reduced to £6,000 for the 2023/24 tax year and reduces further to £3,000 for the 2024/25 tax year.

ISAs protect your investments from Capital Gains Tax

Any gains on investments within an ISA are not liable for UK Capital Gains Tax. You can move your existing investments into an ISA by a process referred to as ‘Bed and ISA’.

More information can be found about Capital Gains Tax and how it works on the Government website.

Tax on Dividends

What is tax on Dividends?

Everyone has a Dividend Allowance, currently £1,000 for the 2023/24 tax year, which means you can currently earn up to £1,000 in dividends each tax year without owing tax.

Dividends are a portion of a company’s profits which is paid to its investors. The rate of tax you owe on dividends will depend on your income tax band. Everyone has a Dividend Allowance which means you can currently earn up to £1,000 in dividends each tax year without paying tax.

More information can be found about tax on dividends on the Government website.

Example

Each year you have a Dividend Allowance, currently £1,000 for the 2023/24 tax year, which means you won’t owe tax on dividends you receive within this allowance.

For example, if you receive £3000 worth of dividends in a tax year, £1,000 of those would fall within your Dividend allowance and therefore would not be taxed, leaving £2,000 which would be liable for tax.

In 2023/24 tax year a basic rate taxpayer would owe 8.75% (£175), a higher rate taxpayer would owe 33.75% (£675), and an additional rate taxpayer would owe 39.35% (£787) on this dividend income.

This information has been prepared for basic information purposes only and is aimed at UK taxpayers. The actual tax you would have to pay will depend on other income and investments and personal circumstances. This is not intended to provide, nor should it be relied on for tax advice.

Changes to Dividend Tax Allowances

In the 2022 Autumn Statement changes were announced to this allowance which reduce it over the next two years. This has reduced to £1000 for the 2023/24 tax year and reduces further to £500 for the 2024/25 tax year.

ISAs protect your investments from tax on your dividends

Any dividends on investments held within an ISA are not liable for tax on dividends. You can move your existing investments into an ISA by a process referred to as ‘Bed and ISA’.

More information can be found about tax on dividends on the Government website.

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