Dividend Tax changes from April 2023

[scrumpyjack]

Don't forget that increases in dividend taxes and CGT will probably not affect assets held in ISAs and personal pensions.

I say probably as one can't rule out them deciding ISAs are far too generous a tax break to be allowed to go untouched without limit

[Lootman]

Don't forget that increases in dividend taxes and CGT will probably not affect assets held in ISAs and personal pensions.

I say probably as one can't rule out them deciding ISAs are far too generous a tax break to be allowed to go untouched without limit

I would have thought that there are some types of tax changes that are too messy to execute part way through a tax year. Changes to the ISA rules might be one.

Changes that are pre-announced to be effective in April 2023 give people time to adapt and prepare. Changes that are effective from midnight on the day of the announcement are more invasive. But as Dod suggests, there isn't a whole lot to be done prior to then, and I am certainly not going to sell off holdings just in case (say) CGT goes up by a bit later this month.

[ADrunkenMarcus]

I hold foreign shares such as MasterCard and Kone, whose dividends are already paid net of withholding tax (whether in an ISA or not).

Any unwrapped foreign shareholdings won’t suffer from U.K. dividend tax.

Best wishes


Mark

[88V8]

I hold foreign shares such as MasterCard and Kone, whose dividends are already paid net of withholding tax (whether in an ISA or not).
Any unwrapped foreign shareholdings won’t suffer from U.K. dividend tax.

Really?
I don't have enough foreign holdings that I've ever bothered to work it out, but I'd idly assumed that any foreign tax already paid is 'topped up' to the level of our dividend tax.

V8

[ADrunkenMarcus]

I hold foreign shares such as MasterCard and Kone, whose dividends are already paid net of withholding tax (whether in an ISA or not).
Any unwrapped foreign shareholdings won’t suffer from U.K. dividend tax.

Really?
I don't have enough foreign holdings that I've ever bothered to work it out, but I'd idly assumed that any foreign tax already paid is 'topped up' to the level of our dividend tax.

V8

In the case of MasterCard, there is a US-UK treaty which reduces the 30% withheld to 15%. That is still more than a basic rate UK taxpayer would pay. (The situation for holdings in pensions is different.)

Best wishes


Mark.

[88V8]

I hold foreign shares such as MasterCard and Kone, whose dividends are already paid net of withholding tax (whether in an ISA or not).
Any unwrapped foreign shareholdings won’t suffer from U.K. dividend tax.

Really?
I don't have enough foreign holdings that I've ever bothered to work it out, but I'd idly assumed that any foreign tax already paid is 'topped up' to the level of our dividend tax.

In the case of MasterCard, there is a US-UK treaty which reduces the 30% withheld to 15%. That is still more than a basic rate UK taxpayer would pay.

Ah yes, thankyou.
15% with W8-BEN.
It's just us higher rate milch cows that have to cough up a bit more....

V8

[ADrunkenMarcus]

Beyond GBP 2,000 outside an ISA you are taxed on the dividends, initially at 7.5% (assuming no other income source). Previously, this was not the case. However, as Lootman, notes, worse is probably yet to come.

That's what I said, and yes, I agree that almost certainly worse is to come, so that incorporated IT contractors pay more tax than they do currently. We've already seen one increase, now reversed but probably only temporarily.

I don't really see the massive issue with this. As I said, hardly anyone is impacted, and almost everyone can avoid paying it by moving holdings into an ISA.

StepOne

On the current basis of the £2,000 dividend allowance, someone could have an (unwrapped) £100,000 portfolio yielding 2% or a £200,000 portfolio yielding 1% and still pay no UK dividend tax at all. The current tax rates above £2,000 for basic and higher rate taxpayers compare reasonably in many ways with those of other countries.

The vast majority of the population don't have £20,000 'spare' each year to stuff in their ISAs. However, for those who do and are aiming for a high dividend income, each £20,000 at a 5% yield gets them £1,000 a year in tax free income.

Best wishes


Mark

[DelianLeague]

I hold foreign shares such as MasterCard and Kone, whose dividends are already paid net of withholding tax (whether in an ISA or not).

Any unwrapped foreign shareholdings won’t suffer from U.K. dividend tax.

Best wishes


Mark

Thank you for this info, I wasn't completely sure how they were treated in a trading account as it didn't effect me anyway with the current allowances. I have some unwrapped foreign shares that are taxed at source. So it is a bit like in the UK a few years ago then. I wasn't sure if there was a limit.
Unfortunately I have 19% deducted from my foreign holding, but if I wish, I can have the pleasure of filling in paperwork with the country's tax system for a refund of a further 9%. I have never bothered.

Regards, D.L.