Hands off our investments - IG urges Chancellor to leave pensions, CGT and dividend tax alone or risk wiping £4 billion off UK stock market
- IG analysis shows small two percentage point hike in both dividend and capital gains tax (CGT) could slash £4bn off FTSE
- Cutting pension tax-free lump sum to £100k would reduce annual contributions by £300m
- IG calls on government to leave pensions, CGT and dividend tax alone to protect retail investors and the UK stock market
Wednesday 22 October, London - The Chancellor could wipe billions of pounds off the UK stock market with even modest changes to key retail investor taxes, according to new analysis from investing and trading platform IG as part of its new ‘Hands off our investments’ campaign.
The research finds that ahead of next month’s Autumn Budget, a two percentage point increase in dividend tax and capital gains tax - often considered easy revenue targets - could knock £4bn off the value of the FTSE. IG’s analysis draws on established economic research on the link between tax changes and equity values, combined with UK investor ownership data from the Office for National Statistics (ONS).
IG’s advanced economic modelling also examined the impact of reducing the pension tax-free lump sum. Using published estimates from the Institute for Fiscal Studies on savers’ responsiveness to tax incentives, the analysis finds that cutting the lump sum to £50,000 could reduce annual pension contributions by around £800m, while a smaller reduction to £100,000 would still result in a £300m fall in contributions.
As part of its Hands off our investments campaign, IG is urging the government to leave three key investor-focused tax policies untouched:
- No reduction in the pension tax-free lump sum - currently £268,000
- No increase to dividend tax - currently £500 tax-free; then 8.75% for basic rate, 33.75% for higher rate, and 39.35% for additional rate taxpayers
- No increase to capital gains tax - currently £3,000 annual exempt; then 18% for basic rate taxpayers and 24% for higher rate taxpayers
IG warns that tinkering with these taxes risks undermining the Chancellor’s efforts to build a nation of investors.
Michael Healy, UK Managing Director at IG, said: “The government has been clear about its ambition to shift the UK away from a savings-first mindset and encourage more Brits to invest, supporting the stock market and growing their wealth. That goal would be seriously undermined if any of the tax areas we’ve highlighted are targeted in next month’s Autumn Budget.
“If we want to build a nation of investors, we cannot make it less attractive to invest - whether that’s in an ISA, outside of an ISA, or in a pension. We’re asking the government to keep their hands off our investments: no raids on pensions, no hikes to dividend tax, and no increase to capital gains tax. Britain needs long-term investors, not short-term tax grabs.”
Connect with us
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Professional clients trading spread bets and CFDs can lose more than they deposit.
Options and futures are complex instruments which come with a high risk of losing money rapidly due to leverage. They’re not suitable for most investors. Before you invest, you should consider whether you understand how options and futures work, the risks of trading these instruments and whether you can afford to lose more than your original investment.
Trading stocks and shares ‘on margin’ within a US options and futures account – meaning that you only finance part of the cost of acquiring a position in a security – carries additional risks over buying securities on a fully funded basis and may result in losses exceeding your original investment. Trading on margin will also result in additional costs to you as the investor and any securities purchased using margin may be held as collateral by the lender, restricting both your rights as shareholder, and your ability to use the securities until the margin trade is closed. You should familiarise yourself with these risks before trading on margin.
The value of shares, ETFs and other ETPs bought through a share dealing account, a US options and futures account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results. Some ETPs carry additional risks depending on how they’re structured, investors should ensure they familiarise themselves with the differences before investing.
Share dealing and IG Smart Portfolio accounts provided by IG Trading and Investments Ltd, CFD accounts and US options and futures accounts are provided by IG Markets Ltd, spread betting provided by IG Index Ltd.
IG is a trading name of IG Trading and Investments Ltd (a company registered in England and Wales under number 11628764), IG Markets Ltd (a company registered in England and Wales under number 04008957) and IG Index Ltd (a company registered in England and Wales under number 01190902). Registered address at Cannon Bridge House, 25 Dowgate Hill, London EC4R 2YA. IG Markets Ltd (Register number 195355), IG Trading and Investments Ltd (Register Number 944492) and IG Index Ltd (Register number 114059) are authorised and regulated by the Financial Conduct Authority.
The information on this site isn’t directed at residents of the United States, Belgium or any particular country outside the UK and isn’t intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
