EY Comment: Dividend Allowance cut targeted at owner managers but hits those with share portfolios

08 March 2017

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Chris Sanger, head of tax, EY, comments on cuts to the dividend allowance:

“The Chancellor took an axe to one of the core allowances of his predecessor, something that has been in effect for less than a year. The Dividend Allowance of £5,000 was announce by George Osborne in his Summer Budget in 2015 with the express intention to apply to ‘those who either pay themselves in dividends or have large shareholdings worth typically over £140,000 will pay more tax’.

“The Chancellor cut this to just £2,000, meaning that those who have just more than £50,000 in shares will now be caught up by a tax rise that is ostensibly targeted at owner managers.

“The cut in allowance will mean that a higher rate taxpayer receiving £5,000 of dividend income will now face almost £1,000 in extra tax.  This will be a bitter blow for those who are relying on these savings to fund their retirement but who now find themselves as ‘collateral damage’.”