The complex world of tax on investment
The way that investments are taxed has changed over recent years as successive governments have chosen to handle various sources of investment income in different ways. The aim has typically been to increase tax revenues.
Alongside this, the whole tax system has grown increasingly elaborate, thanks to revenue-raising tweaks such as the taxation of child benefit and multiple reforms of dividend taxation. The situation was highlighted in a paper on savings tax from the government’s own Office of Tax Simplification published in May 2018. This noted that, “the interactions between the rates and allowances is sufficiently complex at the margins that HMRC’s selfassessment computer software has sometimes failed to get it right”.
This guide offers a brief outline of how your investments are currently taxed. In the wake of the Covid-19 pandemic, government expenditure has increased dramatically and tax revenue has similarly declined. In the March 2021 Budget, the Chancellor took the first steps on the path to increasing taxes, with many personal tax allowances and bands frozen until 2026 and a 6% jump in the main rate of corporation tax from April 2023. More tax rises could emerge in the autumn 2021 Budget. Expert advice is necessary if you require more information or a greater insight into how to cut your tax bill now.