In his Autumn Statement the Chancellor announced reductions in the dividend allowance (£1,000 in 2023/24 and £500 thereafter) and capital gains tax annual exemption (£6,000 in 2023/24 and £3,000 thereafter).
Not only will these reductions result in higher taxes, but also will drag more individuals into the self-assessment system at a time when HM Revenue & Customs (HMRC) can barely cope with existing workloads.
Capital gains
Unless reporting limits are changed, from 6 April 2024 individuals who sell assets worth more than £12,000 will be required to file at least a CGT return and possibly a full self-assessment return even if no tax is due.
Dividends
The reduction of the dividend allowance to £500 could result in those with modest shareholdings having to file tax returns, where previously they would have had only limited dealings with HMRC.
To put this in context, in 2022/23 Tesco plc paid dividends of 11.55p per share, so a holding of 4,330 shares (worth just under £10,000) would result in the shareholder receiving dividends over £500. If this was repeated in 2024/25 then that shareholder may be required to file a self-assessment tax return and pay any additional tax due.
Tesco currently offers at least two share schemes to its employees – Save-As-You-Earn (SAYE) and Buy-As-You-Earn (BAYE) – and offers a Dividend Reinvestment Plan (DRIP) for all shareholders.
It is not inconceivable that your average worker manning the checkouts will soon have to file self-assessment tax returns alongside investment bankers, hedge fund managers and top City lawyers.