On the reform of Dividend Tax he said: "The current system of
dividend tax credits will be replaced with a new PS5,000 taxfree dividend allowance from April 2016.
Not so fortunate, however, are owner managed companies which will see
dividend tax credits replaced by a new taxfree allowance of PS5,000 on dividend income.
"Over recent years we have seen a constant nibbling away at the incentives to save; reducing lifetime allowances; a fear of means testing for the state pension; investments in pension funds no longer receiving
dividend tax credits - which were a huge incentive in the past; and now more and more pension savers are paying higher rate tax in retirement.
Pensions have already been severely hit by the removal of
dividend tax credits by Gordon Brown back in 1997 - costing savers an estimated pounds 5 billion per annum - reducing tax relief would be the penultimate nail in their coffin.
Pensions have already been severely hit by the removal of
dividend tax credits by Gordon Brown back in 1997, costing savers an estimated pounds 5 billion per annum - reducing tax relief would be the penultimate nail in their coffin.
In response to the newspaper's claims, a Treasury spokesman said: "The Government policy on
dividend tax credits was set out in Budget 1997, including the impact on revenues.
A Treasury spokesman said the papers showed Mr Brown "recognised that
dividend tax credits were an anomaly in the tax system which distorted business decisions and discouraged long-term investment".
Lemma 1: Assuming that more wealth belongs to investors who have higher tax rates (negative net
dividend tax credits), the expected return on the ex date is positive.
'For instance, anyone investing pounds 6,000 in the Jupiter Income Trust within a PEP wrapper ten years ago would have lost pounds 1,289 had we been unable to reclaim the
dividend tax credits.'
Are there circumstances under which
dividend tax credits could be carried forward?
The consultative document, "Large business taxation: the government's strategy and corporate tax reforms", outlines a proposed capital gains tax exemption for companies' substantial shareholdings, affirms a preference for retaining
dividend tax credits (rather than exemption) and announces a review of administrative matters.