ISA savers should be able to hold more than one of the same type of wrapper during a single tax year, the government’s tax adviser has said. The Office of Tax Simplification (OTS) has said ISA rules should be made simpler for investors to administer.
It suggests changing the rule where only one type of ISA can be opened at a time and instead letting savers hold multiple products, such as more than one Innovative Finance ISA from different peer-to-peer lenders or a variety of cash ISAs, as long as they remain within the annual allowance.
More potential dividend tax woes for the wealthy
The complexity of dividend taxation could be swept away under a proposal to remove the current system of discounted rates and treat payments the same as income tax. Less positively, though, the proposal by the Office of Tax Simplification (OTS), would likely hit wealthier, older savers and business owners by removing some of the discounts currently applied to dividends versus earned income. Dividends held outside tax wrappers are currently subject to a tax-free allowance of £2,000. Above that, within the basic tax rate band dividends are taxed at 7.5%, in the higher rate band at 32.5% and in the additional rate band at 38.1%. Those offer a substantial discount to income tax set at a basic rate of 20%, higher at 40% and additional at 45%. But the proposed changes would have the effect of increasing the amount of tax due from those who receive amounts of dividend income above the allowance. It would also impact on the taxation of profit extracted as a salary or as a dividend, from family-owned companies.
Time to buy UK shares?
Brexit uncertainty and the prospect of a (anti-business) Labour government has caused UK stocks to become some of the cheapest in the world – £1.8 billion was withdrawn from the Investment Association‘s UK All Companies sector in 2017 alone. While this negative sentiment represents a source of concern for some investors, it has also created opportunities and some real value for money versus some international peers. In considering UK shares it is worth bearing mind that: uncertainties are now largely discounted (having been priced in), policy uncertainty is reducing, consumer sentiment is bottoming out and, perhaps more importantly, that the UK equity market is global in nature – as is the source of its revenue and profit. The banking sector is regarded as a particular sector offering value, while more defensive sectors like utilities and telecoms are regarded with less optimism.
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