Chancellor Rachel Reeves's recent Budget has sent shockwaves through the UK's community of do-it-yourself investors, with new analysis revealing widespread anxiety over impending tax increases on dividends, savings, and property.
Budget Measures Spark Investor Concern
A survey conducted by wealth management firm Charles Stanley found that over 70 per cent of investors are worried about the raised basic and higher rates of tax on dividends, property, and savings. The concerns follow a Budget aimed at channelling more funds into public markets, which has simultaneously tightened the fiscal screws on many individuals managing their own investments.
The key changes set to take effect from April 2026 involve significant hikes to dividend taxation. For basic rate taxpayers, who earn between £12,571 and £50,270, the dividend tax rate will jump to 10.75 per cent, up from the current 8.75 per cent. Higher rate taxpayers, with incomes between £50,271 and £125,140, will face an even steeper rise, paying 37.75 per cent, an increase of four percentage points from 33.75 per cent.
Broader Tax Landscape Tightens
The fiscal pressure extends beyond dividends. From April 2027, the tax on savings and property income will also climb. Basic rate taxpayers will be charged 22 per cent, while higher rate taxpayers will see a rate of 42 per cent.
Investor apprehension is further compounded by other measures. The survey indicated that 71 per cent of respondents are concerned about the reduction of the cash ISA allowance to £12,000. Additionally, 66 per cent expressed worry about the extension of the income tax threshold freeze until 2031, a move expected to pull an extra 920,000 Britons into the 40 per cent tax band by that date.
Future changes to salary sacrifice pension schemes, scheduled for 2029, also featured among the worries. These reforms will cap annual tax-free pension contributions at £2,000.
Rob Morgan, chief investment analyst at Charles Stanley, commented on the Budget's intent. "No one was expecting a quiet Budget and so it proved," he said. "This year, the chancellor’s objective was to calibrate raising tax revenue without impinging economic growth or stoking inflation. While there was a little more pressure applied to businesses... it was moderate to high earners and wealthy individuals who were most in the firing line this time."
How Savers and Investors Can Prepare
With the changes not coming into full force until next year, there is still a window for individuals to adjust their financial arrangements. Experts suggest several strategies to mitigate the impact.
Investors holding shares outside of tax-free wrappers should consider moving capital into sheltered accounts like pensions or Stocks and Shares ISAs. Dividends accumulated within a pension are free from dividend and capital gains tax and do not count toward the £500 dividend allowance, though access is typically restricted until age 55.
Similarly, a Stocks and Shares ISA shields dividends from income tax up to the £20,000 annual subscription limit and protects them from the dividend allowance. Those with funds in cash ISAs may also benefit from exploring Stocks and Shares ISAs due to this higher tax-free ceiling.
"Speaking to a financial adviser can help in understanding what these mean for individuals and their finances to keep them in the best position possible," advised Morgan, emphasising the value of professional guidance in navigating the new tax landscape.
