Boris Johnson targets dividends as part of social care funding plan

Prime Minister Boris Johnson is targeting investors with a new tax on dividends to fund the health and social care systems.

In a surprise move on top of a much-trailed increase in National Insurance rates, Johnson announced the proposed tax on investors to the House of Commons on 7 September.

“Because we are also increasing dividend tax rates we will be asking better off business owners and investors to make a fair contribution too,” Johnson told MPs.

READ Stock pickers ride vaccine optimism to trounce passives with £1.3bn haul

“Those who earn more, will pay more,” Johnson added, arguing that the highest earning 14% will pay around half the revenue in the tax package.

The proposed increase in dividend taxation of 1.25% was announced alongside an increase in National Insurance which is set to be hiked by 1.25%.

Over half the increase in dividend tax rates will come from the top 10% of households, the government’s analysis claims.

The increase in tax on dividends follows a week of attacks on the anticipated hike in National Insurance contributions, which critics said targets lower-paid employees while letting wealthier investors off the hook.

Shadow chancellor Rachel Reeves had said people with stocks, shares and property “will pay not a penny more” in advance of Johnson’s announcement on dividends.

Tom Selby, head of retirement policy at investment platform AJ Bell, said: “Increasing dividend taxation feels like a last-ditch attempt to convince voters that all sections of society are sharing responsibility for funding social care reform.”

READ Lower taxes for banks to keep UK competitive, TheCityUK says

Speaking to MPs in parliament Labour leader Keir Starmer also criticised the prime minister for failing to make wealthier people pay more for their care through taxation on capital gains, property or other wealth.

Johnson acknowledged that the NI hike breaks a Conservative manifesto commitment, but said “it would be wrong to say we can pay for this recovery without taking the difficult decisions about how to pay to it” and that it would be “irresponsible to meet the costs from higher borrowing and higher debt.”

Johnson said he would be “asking business owners and investors to make their contribution” to help solve the NHS backlog and underfunding in social care in a way that was “right and reasonable and fair”.

AJ Bell’s Selby said investors should examine their portfolios to ensure they were not paying more tax than they needed to.

“The increase in dividend tax means people investing outside tax sheltered wrappers like pensions and Isas should review their portfolios to make sure they are making as much used as possible of their annual contribution allowances to keep their tax bills as low as possible,” he said.

Shaun Moore, tax and financial planning expert at Quilter, added: “With bond yields and interest rates showing no sign of rising, investors and retirees have come to rely heavily on dividends to receive their income. As such, there is nowhere to turn for this group from this tax levy unless they invest smartly in tax efficient savings vehicles such as Isas and pensions.”

To contact the author of this story with feedback or news, email James Booth

Most Related Links :
todayuknews Governmental News Finance News

Source link

Back to top button
Native News Post