- Dividend tax hike of 1.25 percentage points
- Company directors and sole traders hit hardest
Investors who draw income from funds held outside of tax-free individual savings accounts (Isas) or self-invested personal pension (Sipp) wrappers face a significant hike in tax on dividend payments of 1.25 percentage points from April next year, as the government seeks to raise additional revenue to cover higher spending on social care and the NHS over the next three years.
Combined with a matching rise in National Insurance contributions, the move is expected to deal the hardest blow to contractors, sole traders and company directors who draw dividends as income from their businesses. In addition, up to 1m retirees still in some form of employment will have to pay NI contributions on their earned income for the first time.