The big dividend tax shake-up

The recent Budget included several radical changes to our tax system – and one of the biggest was the treatment of dividends. Cris Sholto Heaton explains.

Last week's Budget included several radical changes to our tax system and one of the biggest was the treatment of dividends. While George Osborne couched his plans in terms of an overdue reform of a "complex and archaic" system, the reality is that they will also lead to higher taxes for a number of investors and business owners.

It's certainly true that the way that dividends are taxed at the moment causes no end of confusion. Let's summarise the current rules. Dividends come with a 10% notional tax credit and carry notional tax rates of 10% for basic-rate taxpayers, 32.5% for higher-rate taxpayers and 37.5% for additional-rate taxpayers.

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Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.