This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

Finance Bill and Tax Changes

When a General Election is called, with the imminent prorogation of Parliament when all Bills that are passing through Parliament are effectively abandoned, the Government has to rush through any important Bills that it wants to get passed. That is what happened yesterday (25/4/2017) when only a few hours debate was available on the Finance Bill. That Bill contained many of the recent changes announced by the Chancellor in his Budget but many of them have been removed from the Bill so as to ensure its quick passage. It also avoids any politically embarrassing changes being implemented before the election. They may get revived in new legislation after the election in the new Parliament, reconsidered or quietly forgotten about. The latter being of course likely if there is a change in the political complexion of the Government or changes of Ministers.

These are some of the tax and other changes removed from the Bill:

  1. The reduction of the Dividend Tax Allowance to £2,000 from 2018. ShareSoc raised concerns about this and asked our Members to write to their MPs on the topic – see https://www.sharesoc.org/blog/taxation/double-taxation-and-broken-promises/ . It was certainly a vote loser for anyone who receives substantial dividends and it would definitely be good to get this reconsidered.
  2. The reduction in the annual pension allowance from £10,000 to £4,000 from 2017 to stop “re-cycling” of pension contributions where pensions were already being taken is out. So you may have another year to use the higher amount.
  3. The “Digital Tax” plan to force smaller companies to submit quarterly tax returns electronically is dropped. This was a very unpopular move by HMRC among small businesses as it would have imposed major extra costs on them. This is likely to simply be deferred.
  4. The change to increase Probate Fees very substantially on larger estates has been dropped – see https://www.sharesoc.org/blog/taxation/it-could-get-more-expensive-to-die/. This proposed change provoked a lot of criticism from the public including several ShareSoc Members. Again it would be good if this was reconsidered rather than simply postponed.
  5. Some changes to the rules on EIS and VCT investments and social investment tax relief are out.
  6. Corporation tax relief changes are out.
  7. Disclosure of tax avoidance schemes and penalties for enablers are out.

There are quite a lot of other clauses removed – one could say that a hatchet has been taken to the Bill to get it passed. But if you take the opportunity to ask questions of your prospective MPs in the hustings, you may like to pointedly ask them about their views on some of the above and whether their Party would revive these measures.

Roger Lawson

3 Comments
  1. sharesoc 26th April 2017 at 9:35 am

    We object to any proposals that negatively impact any of our Members, and particularly those points on which they complain to us. The changes to dividend taxes have negatively affected anyone who receives significant amounts of dividend income and that includes some who would not be seen as “high net worth” individuals. But a number of our members are actually high net worth individuals and they are of course also “private shareholders”, so I don’t quite understand your latter differentiation.
    Roger Lawson

  2. Chris Stockdale 26th April 2017 at 9:14 am

    The underlying problem is that the taxation system is far too favourable to those who have capital. The dividend tax allowance was a welcome step towards addressing this. Surprised to see ShareSoc taking a position on this.

    Is it a ShareSoc policy to stand against tax changes that might negatively affect high net worth private investors? I thought you were all about campaigning for better rights for private shareholders?

  3. Stephen Burke 26th April 2017 at 10:57 am

    The backing off on the dividend tax and pension allowance also mean that we’re left in limbo when it comes to planning – especially for the pension where the decision is irreversible. Governments still don’t seem to understand (or don’t care) that constantly changing the rules without warning causes problems in itself when people are trying to plan decades into the future.

    On the comment above, it seems fairly clear that the dividend tax is aimed at self-employed people who incorporate to reduce their tax bill; hitting investors is just a side-effect. I don’t personally see that having £2000 of dividend income makes you wealthy. Also many wealthy investors will have their investments in ISAs, SIPPs, VCTs and EISs and be immune, but some smaller investors won’t have bothered with ISAs because there hasn’t been any advantage for basic-rate taxpayers for 20 years. And in fact the way the change was implemented means that some higher-rate taxpayers got a decrease in tax, because they now have a tax-free allowance where they would previously have paid 25% of the dividends in tax.

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