Autumn Statement  

Dividend and capital gains tax allowances cut

Dividend and capital gains tax allowances cut
 

The chancellor has cut the dividend allowance as part of his Autumn Statement.

Speaking to the House of Commons this morning (November 17), Jeremy Hunt said the allowance will be cut from £2,000 to £1,000 in April next year, and then reduced down to £500 from April 2024.

It has been previously predicted that this could raise £455mn for Treasury coffers.

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The annual exemption amount for capital gains tax will also change, dropping from £12,300 to £6,000 from April 2023.

It will then drop to £3,000 from April 2024.

Tim Walford Fitzgerald, tax partner at HW Fisher, said the decision to halve the capital gains tax means many could find themselves paying the tax for the first time on “modest share portfolios”.

“This is bad news for landlords, second home owners and those looking to sell their property as capital gains tax is applied at a much higher rate for residential property sales,” he said.

Walford Fitzgerald said we can expect to see a decline in the number of disposals – people will hold off from selling their assets during unfavourable conditions. 

“Or, if there is a delayed introduction for the new threshold, look out for a quick spike in sales as individuals and families try to beat the new implementation date.”

The measures are being put in place by the chancellor in an attempt to fill a hole in public finances, due to his own rules on fiscal spending.

The chancellor has previously said that he wants public debt to fall as a share of gross domestic product in the next five years, and if he is to adhere to that he must raise between £40bn and £55bn in the next year.

The Bank of England warned earlier this month that the UK could be facing its longest recession on record, after it raised interest rates by 0.75 percentage points.

In its guidance, the BoE laid out two possible scenarios for the UK’s economy, with the first predicting interest rates will rise to 5.25 per cent and the UK will be in a recession for at least two years.

This would mark the longest recession in nearly 70 years.

sally.hickey@ft.com