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Tax and ISA Changes

In 2023 the Chancellor announced in the Autumn Statement changes to ISA Subscriptions and how they are managed. This is in addition to the changes announced in 2022 on Capital Gains Tax and Dividends Tax Allowances. To help you understand how the changes could impact you, we’ll answer your most popular questions.

  1. Changes to ISA Subscriptions
  2. What is Capital Gains Tax?
  3. Example Calculation
  4. Changes to Capital Gains Tax

5. What is Dividends Tax?

6. Example Calculation

7. Changes to Dividends Tax

This information has been prepared for basic information purposes only and is aimed at UK taxpayers. The actual tax you would have to pay will depend on other income and investments and personal circumstances. This is not intended to provide, nor should it be relied on for tax advice.

ISA Subscriptions

ISA Subscriptions allow you to save a set amount of money each tax year that is protected against UK Capital Gains and Dividends tax. The amount is £20,000 for the 2024/25 tax year.

The 2023 Autumn Statement announced changes to how you can manage this allowance across different types of ISAs. From 6 April 2024, you can subscribe to multiple ISAs of the same type (except for Lifetime ISA) within the tax year. All subscriptions must stay within the overall ISA limit of £20,000.

Capital Gains Tax on Investments

What is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax you might owe on the gain when you sell an asset (ie. Investment) that has increased in value.

More information can be found about Capital Gains Tax and how it works on the Government website.

Example

It’s the gain that is taxed. For example, if you bought £1,000 of an investment and sold it at £20,000, your gain would be £19,000 (£20,000 - £1,000).

Each year you have a Capital Gains Tax Allowance, set at £3,000 for the 2024/25 tax year, which means you won’t owe tax on any gains within this allowance.

In this example, where a gain of £19,000 has been made in 2024/25, £3,000 would fall within the CGT allowance. This leaves £16,000 that would be liable for CGT.

In 2024/25 tax year, a basic rate taxpayer would owe 10% (£1,600 – assuming your income including the gain stays within the basic rate band). A higher rate taxpayer would owe 20% (£3,200) on this gain. 

Please note that not all investments are liable for Capital Gains Tax and there are separate Capital Gains Tax rules for selling properties which are also detailed on the Government website.

This information has been prepared for basic information purposes only and is aimed at UK taxpayers. The actual tax you would have to pay will depend on other income and investments and personal circumstances. This is not intended to provide, nor should it be relied on for tax advice.

Changes to the Capital Gains Tax Allowances

In the 2022 Autumn Statement, the allowance was reduced to £6,000 for the 2023/24 tax year and further to £3,000 for the 2024/25 tax year.

ISAs protect your investments from Capital Gains Tax

Any gains on investments within an ISA are not liable for UK Capital Gains Tax. You can move your existing investments into an ISA by a process referred to as ‘Bed and ISA’.

More information can be found about Capital Gains Tax and how it works on the Government website.

Tax on Dividends

What is tax on Dividends?

Everyone has a Dividend Allowance, which is £500 for the 2024/25 tax year. This means you can earn up to the allowance in dividends each tax year without owing tax.

Dividends are a portion of a company’s profits that are paid to its investors. The rate of tax you owe on dividends will depend on your income tax band. 

There is more information about tax on dividends on the Government website.

Example

Each year you have a Dividend Allowance. It is set at £500 for the 2024/25 tax year.  This means you can earn up to the allowance in dividends each tax year without owing tax.

For example, if you receive £2,900 worth of dividends in the 2024/25 tax year, £500 of those would fall within your Dividend allowance and wouldn’t be taxed. It would leave £2,400 that would be liable for tax.

In the 2024/25 tax year a basic rate taxpayer would owe 8.75% (£210), a higher rate taxpayer would owe 33.75% (£810), and an additional rate taxpayer would owe 39.35% (£944.40) on this dividend income.

This information has been prepared for basic information purposes only and is aimed at UK taxpayers. The actual tax you would have to pay will depend on other income and investments and personal circumstances. This is not intended to provide, nor should it be relied on for tax advice.

Changes to Dividend Tax Allowances

In the 2022 Autumn Statement, changes were announced to this allowance. It was reduced to £1,000 for the 2023/24 tax year and to £500 for the 2024/25 tax year.

ISAs protect your investments from tax on your dividends

Any dividends on investments held within an ISA are not liable for tax on dividends. You can move your existing investments into an ISA by a process referred to as ‘Bed and ISA’.

More information can be found about tax on dividends on the Government website.

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Example

It’s the gain that is taxed. For example, if you bought £1,000 of an investment and sold it at £20,000, your gain would be £19,000 (£20,000 - £1,000).

Each year you have a Capital Gains Tax Allowance, set at £6,000 for the 2023/24 tax year. It’s then reduced to £3,000 for the 2024/25 tax year, which means you won’t owe tax on any gains within this allowance.

In this example, where a gain of £19,000 has been made in 2024/25, £3,000 would fall within the CGT allowance. This leaves £16,000 that would be liable for CGT.

In 2024/25 tax year, a basic rate taxpayer would owe 10% (£1,600 – assuming your income including the gain stays within the basic rate band). A higher rate taxpayer would owe 20% (£3,200) on this gain. 

Halifax Share Dealing Limited. Registered in England and Wales no. 3195646. Registered Office: Trinity Road, Halifax, West Yorkshire, HX1 2RG. Authorised and regulated by the Financial Conduct Authority under registration number 183332. A Member of the London Stock Exchange and an HM Revenue & Customs Approved ISA Manager.