Budget 2017: United Kingdom cuts tax-free dividend allowance to £2k

The chancellor of the exchequer said that when the centre-right Conservatives entered government in 2010, Britain was borrowing one pound in every five spent but the deficit was now down by almost two-thirds.

But Labour accused the Chancellor of breaking a Conservative party manifesto pledge from 2015 in which the Tories promised not to raise NICs.

Not only is this vital for them as individuals, it is vital for British business, too.

Ian Kernohan of Royal London Asset Management, was another among the ranks of economists who seemed to cautiously welcome the Chancellor’s measured approach.

Stuart Clarke, festival director of the Leeds Digital Festival and director of Media Yorkshire, said he would like to see greater simplification of the R&D tax credits system.

While the rate is generous when compared to normal savings accounts, it’s worth pointing out that the Bank of England expects inflation to rise as high as 2.7% this year, so savings in this bond could actually lose value in real terms.

Delivering the last-ever Spring Budget, the Chancellor highlighted the Office for Budget Responsibility (OBR) had revised its forecast for the United Kingdom economy, which will now expand at a 2% rate this year, compared with an initial guideline of 1.4%.

Public borrowing has been cut by around £12bn since the 2016 Autumn Statement, leaving the UK’s deficit at 3 per cent of national income.

Borrowing for this financial year was due to come in at £65.2bn but that has fallen in the latest forecasts to £51.7bn. “We have the economic plan that will secure the future of our most important public service”.

Much of the increased income will be spent on meeting the additional costs of rises to the national living wage, which comes into effect this April.

Les Cameron, head of technical at Prudential, said the dividend allowance cut £2,000 will reduce the size of the portfolio that can be held tax efficiently by over 50 per cent.

Treasury estimates said the move would produce £5m in revenue in 2018/19, then £870m, £825m and £930m in subsequent years.

Chancellor Philip Hammond faced an immediate backlash over plans for a massive tax hike for millions of self-employed workers.

Dividends above that threshold will be taxed at 7.5 per cent for basic-rate taxpayers, 32.5 per cent for higher-rate taxpayers and 38.1 per cent for additional-rate taxpayers. “This will be a bitter blow for those who are relying on these savings to fund their retirement but who now find themselves as “collateral damage”.

This immediate relief is vital in the short-term, and action on more frequent revaluations will also help. Most notably, 90% of pubs will get a £1,000 discount on their new rate bills.

Measures include a 300 million-pound fund that will enable local authorities to give discretionary relief to the hardest-hit businesses. This is set to be the largest contributor to tax tightening, accounting for over half the Budget’s extra tax revenue in each year, according to Aberdeen Asset Management chief economist Lucy O’Carroll.