Daily Express

Tax bills are to keep rising for years to come

- By Harvey Jones

THIS year has been taxing enough as the Treasury’s take hits a post-war high but 2024 looks set to be worse with Britons handing even more of our earnings, pensions and savings to HMRC.

Chancellor Jeremy Hunt made a big noise about cutting 2p off National Insurance (NI) from January 6 but millions of people will pay more income tax and NI as his tax threshold freeze continues.

Sarah Coles, head of personal finance at financial services company Hargreaves Lansdown, warned: “Frozen thresholds and fiscal drag will keep pushing up your tax bill every year until the freeze ends in 2028.”

She said taxpayers will get hit by a string of “sneaky tax rises” in the year ahead.

From April 6, the allowance for dividends earned from shares outside of the tax-free Isa allowance is halved for the second year in a row, this time from £1,000 to £500.

“Any dividends above that are taxed at 8.75 per cent for basicrate taxpayers, 33.75 per cent for higher-rate taxpayers and 39.35 per cent for additional­rate taxpayers.”

Business owners who pay themselves with dividends out of profits will take a hit at a time when they’re already facing threats such as rising input prices and higher wage bills, Coles said.

The capital gains tax (CGT) allowance is slashed from £6,000 to £3,000 on the same day. This will cost investors banking capital gains on non-Isa shares, or owners selling second homes and investment properties.

The property market has had a choppy 12 months but prices have only dipped slightly and a sale could incur a large tax bill, Coles said. “Investors are likely to be sitting on gains, particular­ly if they bought years ago. Thanks to the CGT cut, they will be taxed on more of it.”

The inheritanc­e tax (IHT) nil rate band remains frozen at £325,000 and the residence nil rate band at £175,000. More estates will pay more IHT as asset prices rise. “We’re paying 11 per cent more IHT this year than last, and that is only going to increase,” Coles said.

Council tax bills will rise again in April, by as much as 5 per cent. Higher prices mean we will paying more VAT and tobacco duty also rose last month. The only reprieve is that alcohol duty is frozen until next August.

Coles urged savers to fight back with their tax-free £20,000 Isa allowance. “A stocks and shares Isa will protect you from dividend tax and CGT, while a cash Isa will protect you from income tax on savings interest.”

First-time buyers should use a Lifetime Isa to claim a £1,000 bonus on contributi­ons of £4,000, and families can save £9,000 tax free in a Junior Isa.

Pensions contributi­ons qualify for tax relief and the first 25 per cent of withdrawal­s are tax free.

“You can contribute up to £3,600 for a non-working spouse and get relief,” Coles said.

Married people should consider switching savings, dividend-paying shares or property into the name of the lower taxpayer, to reduce the tax payable.

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