Many investors will be hit with higher tax bills from April, market commentary from AJ Bell has revealed.
Ahead of 2024, AJ Bell shared its household finance predictions for the new year, commenting on Capital Gains Tax (CGT), Council Tax, and the ongoing cost-of-living crisis.
According to Laura Suter, director of personal finance at the firm, due to the Government’s decision to slash the tax-free dividend and Capital Gains Tax allowance for the second year in a row, investors and company directors will be subject to more substantial tax bills.
The amount of dividend income a person can receive before paying tax will be cut from £1,000 to £500, while the tax-free amount for capital gains will be chopped from £6,000 to £3,000.
Suter said: “The move means that a higher-rate taxpayer taking home more than £1,000 in dividends each year will pay £168.75 a year more in tax.
“It will also drag more people into the taxman’s reach, with many of those receiving between £500 and £1,000 a year in dividends paying the tax for the first time.”
She added: “Anyone with capital gains allowance remaining this tax year should consider banking gains up to their allowance and potentially using a Bed and ISA service to move that investment into their ISA where it is sheltered from tax.
“Alternatively, they could transfer the assets to their spouse to make use of any of their unused allowance.”
Suter also shared her predictions for the expected rise in Council Tax bills.
Council Tax rates are set to rise by 5% in April, in order to combat the increasing number of local authorities across the UK in financial difficulty.
According to Suter, if rates increase by 5% it means the average Band D property in the UK will go from paying £2,065 to £2,168.
Households will also see their final cost-of-living payments arrive in February, with some seeing a payout of £299.
The payment will be made to those who were eligible for Universal Credit, tax credits, pension credit and some other income support in a period during November and December 2023.
Suter concluded: “The Government hasn’t floated the idea of issuing more payments, and with inflation figures easing and energy prices dropping, it’s unlikely the package of support will be repeated next winter.”
