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1.25% NI Levy

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Vulgaris
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1.25% NI Levy

#440306

Postby Vulgaris » September 7th, 2021, 1:21 pm

Govt has announced 1.25% dividend levy to pay for social care & NHS

Does this apply to 'tax free' VCT dividends? (& to dividends within ISA and SIPPs for that matter)?

Alaric
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Re: 1.25% NI Levy

#440311

Postby Alaric » September 7th, 2021, 1:29 pm

Vulgaris wrote:Govt has announced 1.25% dividend levy to pay for social care & NHS

Does this apply to 'tax free' VCT dividends? (& to dividends within ISA and SIPPs for that matter)?


They are increasing the 7.5% on dividends over £ 2000 to 8.75%. Seemingly the measure is directed at one person service companies who can avoid NI by paying dividends instead of salary.

The NI increase is allegedly only temporary and will be replaced by a Social Care levy once they get necessary legislation through. As to what the scope of this will be remains to be seen. The suggestion is that it would apply to those over 65 who still have income from work. Whether it would also apply to income from pensions remains to be seen as well as less common income like VCTs.

scrumpyjack
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Re: 1.25% NI Levy

#440313

Postby scrumpyjack » September 7th, 2021, 1:32 pm

Alaric wrote:The NI increase is allegedly only temporary .


That's what they said about Income Tax when they introduced it!

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Re: 1.25% NI Levy

#440314

Postby JohnB » September 7th, 2021, 1:34 pm

7.5% to 8.75% tax on dividends

Vulgaris
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Re: 1.25% NI Levy

#440316

Postby Vulgaris » September 7th, 2021, 1:44 pm

Quite, the 7.5, 32.5, 38.1% doesn't apply for VCTs....... But do they also escape the 1.25%, which is dressed up as a separate levy, not quite like ordinary NI?

murraypaul
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Re: 1.25% NI Levy

#440328

Postby murraypaul » September 7th, 2021, 2:14 pm

It looks like a straightforward increase in dividend tax, not something special:

https://assets.publishing.service.gov.u ... l_Care.pdf
Increasing dividend tax rates

67.The Government will also increase the rates of dividend tax by 1.25 per cent from April
2022. The revenue from this increase will help to fund the settlement announced
today, in addition to the Levy.

68.Dividend tax is paid by individuals who receive dividend income from shares, which is
not subject to NICs or the Levy.

69.This is a fair increase, and it means that those with dividend income, like business
owners and investors, will be making a contribution in line with that made by
employees and the self-employed on their earnings. It is also a highly progressive way
to raise revenue. Additional and higher rate taxpayers are expected to contribute over
70 per cent of the revenue from this increase in 2022-23.

70.In addition, many everyday investors will be unaffected. Shares held in ISAs are not
subject to dividend tax and, due to the £2,000 tax-free dividend allowance and the
personal allowance, around 60 per cent of individuals with dividend income outside of
ISAs are not expected to pay any dividend tax or be affected by this change in
2022-23.

71.This change will apply UK-wide. It will be scored at the Budget and legislated for in the
next Finance Bill.

Dod101
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Re: 1.25% NI Levy

#440332

Postby Dod101 » September 7th, 2021, 2:17 pm

It is a very modest increase and I have no problem with that.

Dod

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Re: 1.25% NI Levy

#440337

Postby Lootman » September 7th, 2021, 2:38 pm

Dod101 wrote:It is a very modest increase and I have no problem with that.

That is the idea. But make enough "very modest" tax increases and over time the overall effect is distinctly immodest.

Dividends were taxed at 0% for basic rate taxpayers until fairly recently. Now it will be 8.75%. What's the betting that we will see 10% in another couple of years? "To save the NHS". Again.

When I started working in the mid-1970s, the employee NIC rate was 5.5%. Now it is 12%. With "stealth" increases in the employer contributions as well.

Both were achieved with repeated small incremental increases, each one of which may have seemed minor, but the overall effect is anything but.

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Re: 1.25% NI Levy

#440339

Postby pje16 » September 7th, 2021, 2:43 pm

This tax is increase is easy to get round
use your ISA allowance this year, next year next year next year etc

Dod101
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Re: 1.25% NI Levy

#440340

Postby Dod101 » September 7th, 2021, 2:48 pm

Lootman wrote:
Dod101 wrote:It is a very modest increase and I have no problem with that.

That is the idea. But make enough "very modest" tax increases and over time the overall effect is distinctly immodest.

Dividends were taxed at 0% for basic rate taxpayers until fairly recently. Now it will be 8.75%. What's the betting that we will see 10% in another couple of years? "To save the NHS". Again.

When I started working in the mid-1970s, the employee NIC rate was 5.5%. Now it is 12%. With "stealth" increases in the employer contributions as well.

Both were achieved with repeated small incremental increases, each one of which may have seemed minor, but the overall effect is anything but.


I know and I am sure you are right. I am surprised that they did not just make it 10% now and get it over with. Anyway it is aimed not at us private investors I am sure, but at the one man service company where the beneficiary pays himself in dividends. I have no sympathy for that. In any case we investors get a huge benefit in ISAs so we cannot complain. I may just transfer some more shares into my ISA this year. I only have a modest amount unprotected anyway. I have been sheltering shares for the last 25 years and each year have taken full advantage of the ISA allowance.

Is the NIC rate 12% for employees? That surprises me.

Dod

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Re: 1.25% NI Levy

#440341

Postby Lootman » September 7th, 2021, 2:53 pm

Dod101 wrote:Is the NIC rate 12% for employees? That surprises me.

Yes and worse than that for employers: 13.8%, between the thresholds anyway.

So add employer and employee rates and you get 25.8%. Plus now presumably another 1.25%, taking it over 27%. Staggering really.

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Re: 1.25% NI Levy

#440344

Postby pje16 » September 7th, 2021, 3:03 pm

Dod101 wrote:Is the NIC rate 12% for employees? That surprises me.
Dod

Sure is, that was successive UK GOVs saying "Watch my lips, no tax increases"

Don't worry we'll stitch you up with increases in NI :roll:

PS its 13.8% for employers

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Re: 1.25% NI Levy

#440359

Postby scotia » September 7th, 2021, 3:40 pm

Lootman wrote:When I started working in the mid-1970s, the employee NIC rate was 5.5%. Now it is 12%.

And the Basic Rate of Income Tax was 35% and now is 20%

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Re: 1.25% NI Levy

#440368

Postby absolutezero » September 7th, 2021, 4:11 pm

Dod101 wrote:It is a very modest increase and I have no problem with that.

Dod

I do. A tax rise where your money gets flushed down the black hole called the NHS.

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Re: 1.25% NI Levy

#440369

Postby absolutezero » September 7th, 2021, 4:12 pm

pje16 wrote:This tax is increase is easy to get round
use your ISA allowance this year, next year next year next year etc

I'm expecting that very generous £20,000 annual allowance to come under pressure.
To save RNHS, obviously. :roll:

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Re: 1.25% NI Levy

#440400

Postby dealtn » September 7th, 2021, 6:10 pm

Dod101 wrote:It is a very modest increase and I have no problem with that.

Dod


A hike of over 16% is described as modest. Interesting. When would a tax hike be a problem I wonder.

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Re: 1.25% NI Levy

#440424

Postby AWOL » September 7th, 2021, 7:04 pm

scrumpyjack wrote:
Alaric wrote:The NI increase is allegedly only temporary .


That's what they said about Income Tax when they introduced it!



Income tax is still a temporary tax and needs to be reinstated by parliament every year. It expires on the 5th of April. They never seem to forget though!

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Re: 1.25% NI Levy

#444802

Postby RiskyPete » September 23rd, 2021, 6:03 pm

pje16 wrote:This tax is increase is easy to get round
use your ISA allowance this year, next year next year next year etc


Doesn't get around it if you've already maxed it out in a year though...

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Re: 1.25% NI Levy

#444803

Postby RiskyPete » September 23rd, 2021, 6:05 pm

Vulgaris wrote:Govt has announced 1.25% dividend levy to pay for social care & NHS

Does this apply to 'tax free' VCT dividends? (& to dividends within ISA and SIPPs for that matter)?


Thanks for asking the question, this was the very reason I found the message board as I was also wondering about that. From what I've read here and on other sites it sounds like it won't affect VCT dividends.

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Re: 1.25% NI Levy

#444990

Postby BusyBumbleBee » September 24th, 2021, 11:12 am

Just a thought : some VCTs - especially those in the renewable energy sector - rely on dividends from their holdings for a substantial part of their income - which is then delivered to us as shareholders in the VCT which holds those investments.

The 1.25% tax on dividends may well affect us in two ways : less to deliver as dividends and a drop in NAV which in some ways can be thought of as the sum of all future dividends.


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