Planned tax squeezes on shareholders and pension savers that were dropped before the snap general election will go ahead after all, the government said last week.
The measures, announced in March’s budget but later ditched, will reappear in a finance bill soon after parliament returns in the autumn.
Here’s what they will mean for your finances if the bill is passed.
Dividends
The annual tax-free allowance for dividends will drop from £5,000 to £2,000 from next April. Basic-rate taxpayers will be taxed 7.5% on anything over this limit, higher-rate taxpayers will pay 32.5% and additional rate taxpayers 38.1%.
Pensions
The money purchase annual allowance — the amount of new pension contributions you can make if you have already taken out more from your pension than the 25% tax-free element — will be cut from £10,000 to £4,000.
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The change will be backdated to April this year, which means some people may already have exceeded the limit.
If you have already paid in too much, you must declare it on your tax return for this tax year — due in January 2019 — and pay back any relief received on contributions over £4,000. “Don’t pay in any more and make sure direct debits are cancelled,” said Danny Cox of the wealth manager Hargreaves Lansdown.
The self-employed
Ministers have, however, dropped a controversial requirement for smaller, privately owned companies and the self-employed to move to a digital system of reporting tax quarterly by 2019. Only those with turnover above the VAT threshold of £83,000 a year will have to use the system — and then only for VAT.