Basic-rate taxpayers will be driven away from the stock market and forced to leave their savings in cash, according to analysts. Chancellor Jeremy Hunt will cut the dividend allowance from £2,000 to £1,000 in April 2023 and then again to £500 the following year, while leaving the personal savings allowance untouched.
Higher-rate taxpayers have a personal savings allowance of £500 – but basic-rate taxpayers can earn up to £1,000 in interest on their savings before having to pay income tax on the excess.
This means a basic-rate taxpayer with £25,000 in a savings pot paying 4pc will owe no tax, because they would earn £1,000 a year in interest which is within their personal savings allowance.
However if they invested that £25,000 and earned £1,000 in dividends, they would breach their much smaller dividend allowance and be required to pay £44 in dividend tax.
Read more at Yahoo Finance
