Investing tax-efficiently

The complex world of tax on investment

The way that investments are taxed has changed over recent years as successive governments have chosen to handle various sources of investment income in different ways. 

The whole tax system has grown increasingly elaborate, thanks to revenue-raising tweaks such as the taxation of child benefit and multiple reforms of dividend taxation. As more changes are introduced, the complexities increase. The latest revision to dividend taxation was recently announced as part of the restructuring of social care funding in England.

This guide offers a brief outline of how your investments are currently taxed and changes already announced for the next tax year. In the wake of the Covid-19 pandemic, government expenditure increased dramatically and tax revenue declined. Since the March 2021 Budget, the Chancellor has taken some steps to increase taxes, with many personal tax allowances and bands frozen until 2026 and a 6% jump in the main rate of corporation tax from April 2023. A further round of tax rises was revealed in September alongside the NHS/social care announcement. There were no further significant tax increases in the autumn 2021 Budget, but, as the Chancellor said in his speech, ‘‘Taxes are rising to their highest level … since the 1950s".