Investing tax efficiently

The complex world of tax on investment

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.

This guide offers a brief outline of how your investments are currently taxed and future changes (or freezes) that have already been announced. In the wake of the Covid-19 pandemic, government expenditure increased dramatically and tax revenue declined. In the March 2021 Budget, the Chancellor took some significant steps to increase taxes, with many personal tax allowances and bands frozen until 2026 and a six percentage point jump in the main rate of corporation tax from April 2023.

In 2022 there were four Chancellors, but no formal Budget. The tax reductions announced in September by third Chancellor of the year, Kwasi Kwarteng, were largely, but not entirely, reversed ten days later. By mid-November the final Chancellor of 2022, Jeremy Hunt, had added to the future tax burden with a variety of measures. These included an extension to April 2028 of the freeze on the personal allowance and higher rate threshold and a near £25,000 reduction in the additional rate threshold.

The following month saw the Scottish Budget cutting the top rate threshold to match Mr Hunt’s additional rate threshold for 2023/24, freezing other tax bands and adding one percentage point to the higher and top rates of tax.

The March 2023 Budget sprung one more tax surprise, a reform of the pension allowances.

Expert advice is necessary if you require more information or a greater insight into how to cut your share of the growing tax burden.
Please note that all examples included in this guide are fictitious.

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This publication is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this publication. The Financial Conduct Authority (FCA) does not regulate tax advice, so it is outside the investment protection rules of the Financial Services and Markets Act and the Financial Services Compensation Scheme. This publication represents our understanding of the Budget 2023, the Finance (No 2) Bill 2022–23 and law and HM Revenue & Customs practice as at 30 March 2023.