The dividend tax cut scheduled for April 2023 has been scrapped as part of chancellor Jeremy Hunt’s reversal of most of the mini-Budget tax changes.
It means dividend taxation will remain at the current rates of 8.75 per cent, 33.75 per cent and 39.35 per cent for basic, higher and additional rate tax payers, respectively.
Under plans set out by former chancellor Kwasi Kwarteng last month, the rates for basic rate and higher rate tax payers would have been reduced by 1.25 per cent, and the additional rate dividend tax rate would have been abolished.
New chancellor Jeremy Hunt has also scrapped the planned cut in basic rate income tax from 20 per cent to 19 per cent, which was also due to happen next April. He said that the rate of basic rate income tax would remain at 20 per cent "indefinitely until economic circumstances allow for it to be cut."
The swathe of u-turns came after the extreme market reaction ramped up government borrowing costs, adding further pressure to the national balance sheet given that tens of billions of pounds of tax cuts were unfunded.
However, the increase in the thresholds at which stamp duty is charged on property purchases will remain. Since 23 September, homebuyers have only paid stamp duty on the value of property purchases over £250,000, up from the previous threshold of £125,000.
First-time buyers only pay stamp duty on the value of property above £425,000, up from £300,000, and 5 per cent on the value of property between £425,001 to £625,000. This applies to first time purchases of properties which cost less than £625,000, up from the previous maximum of £500,000. The relief cannot be claimed for purchases of properties above £625,000.
The 1.25 per cent cut to National Insurance will also go ahead from 6 November as planned, a move that AJ Bell personal finance head Laura Suter noted will mean “we now have a more uneven playing field between those who earn money via dividends vs those who earn via a salary.”
