Dividend Tax Rate Cuts and VCT/EIS Schemes

Two little noticed changes in today’s Chancellor’s announcements are reductions in dividend tax rates and support for enterprise schemes. I quote from the announcements:

“In addition, the government will reverse the 1.25 percentage point increase in dividend tax rates from April 2023. This will benefit 2.6 million dividend taxpayers with an average saving of £345 in 2023-24 and additional rate taxpayers will further benefit from the abolition of the additional rate of dividend tax. This will support entrepreneurs and investors across the UK to drive economic growth”; and:

“The government is supporting companies to raise money and attract talent by increasing the generosity and availability of the Seed Enterprise Investment Scheme (SEIS) and Company Share Option Plan (CSOP). The government remains supportive of the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) and sees the value of extending them in the future”.

Does this mean that the “sunset” clause for dividend tax relief on VCTs will be removed after 2025? It is not clear.

See https://www.gov.uk/government/publications/the-growth-plan-2022-documents for details of the Chancellor’s Announcements.

There have been some adverse comments on the removal of the additional income tax rate of 45% but simplifying tax rates and structures has clearly been a priority so that is welcomed. The net cost to the Treasury of that change in 2023-24 is only £625 million. Not that I will personally benefit it is worth stating as I have very little “earned” income.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

You can “follow” this blog by entering your email address below. You will then receive an email alerting you to new posts as they are added.

Leave a Reply