Still out of pocket

SIR – Philip Hammond, the Chancellor, claims that this week’s increase in personal allowance means that everyone will pay less income tax (report, April 6).

This may be true for those with earnings and no savings income. The £70 benefit will be negated should an individual be in receipt of dividends in excess of £2,350, because yesterday saw a reduction in the dividend allowance. It brought down the amount of dividends that one may receive tax-free from £5,000 to £2,000.

The yield on the FTSE 100, as shown in your business pages, is 4.02 per cent. This means that the dividends on a relatively modest FTSE 100 portfolio of £58,457 will be enough to wipe out the increase in personal allowances.

Of course, the reason this allowance was reduced was to catch small business owners who pay themselves dividends rather than salary. So much for “putting more into working people’s pockets”, as Mr Hammond claims.

Denese Molyneux

Sidmouth, Devon

SIR – The effective tax rate of 62 per cent at the £100,000 income level is having a massive effect on productivity and tax take.

I suggest Mr Hammond revisits the removal of the personal allowance at £100,000 as soon as possible. I know numerous people who are spending more time with their family rather than working as a result of this change.

M H Symonds

Lymm, Cheshire