Impact of div tax on your FIRE plans?

[TopOnePercent]

Given the budget induced cut in tax free dividends from 5k down to 2k, which amounts to something of the order of a 50% rise in taxes payable on dividends over what they were 2 years ago, has anyone changed their plans or investment strategies as a result?

My own non-ISA investments aren't as yet impacted as they don't return enough to pay the lower dividend taxes, and with the higher ISA limit, I can make the transition relatively seamlessly. Those with larger pots might struggle with this. What concerns me, as more and more people become "ISA millionaires", is what future changes may come due to hungry chancellors seeking easy targets.

I'm wondering if I shouldn't refactor my plans a little and maybe make more use of PPR exemptions on housing to balance the risks.

[TheRIT]

Given the budget induced cut in tax free dividends from 5k down to 2k, which amounts to something of the order of a 50% rise in taxes payable on dividends over what they were 2 years ago, has anyone changed their plans or investment strategies as a result?

My own non-ISA investments aren't as yet impacted as they don't return enough to pay the lower dividend taxes, and with the higher ISA limit, I can make the transition relatively seamlessly. Those with larger pots might struggle with this. What concerns me, as more and more people become "ISA millionaires", is what future changes may come due to hungry chancellors seeking easy targets.

I'm wondering if I shouldn't refactor my plans a little and maybe make more use of PPR exemptions on housing to balance the risks.

No changes for me. It's just reinforced that I need to crack on and emigrate (to most likely Cyprus). Using the double taxation agreement, the new non-dom rules and the Cyprus tax laws my dividends should be taxed at precisely 0% for the next 17 years (or until they change the rules).

[Lootman]

Given the budget induced cut in tax free dividends from 5k down to 2k, which amounts to something of the order of a 50% rise in taxes payable on dividends over what they were 2 years ago, has anyone changed their plans or investment strategies as a result?

It has certainly changed my attitude towards what to hold where. Before the April 2016 changes I liked to park higher-yielding investments in a taxable account because the first 40K or so of dividends were effectively tax "free". That has now changed meaning that I now generally "bed and ISA" my highest yielders. Although even that isn't that clear because it may just give me more of a CGT problem.

The other takeaway is that, between dividend tax changes and the butchering of the BTL market, no UK government can be trusted to safeguard the Thatcher revolution. This government is soaking the middle classes to maintain welfare handouts. Between that and the utter failure of the Tories to mitigate the ravages of inheritance tax, we have no friends left in government. Which in turn means that we have to be ready to abandon the nation if things get worse.

I'm not big on Cyprus given what happened to their banks a few years ago, but there are a few countries that still don't punish you for being successful, prudent and thrifty.

[Snakey]

EU countries? Will you still be able to?

[TheRIT]

EU countries? Will you still be able to?

I'm planning on entering as an EU citizen before the end of the year but in answer to your question sure why not. People were emigrating to places like Cyprus and Spain before we were EU members. The rules of the game may however change meaning that only those who are 'better off', read planned well, may be able to do it.

Using Cyprus as an example as a non EU self-sufficient national you'd need the following (amongst some other things):
- An annual 'income' of at least €9568 for a single applicant plus €4613 for every dependent person; and
- Private health insurance

So if we 'hard Brexit' with no special relationships being agreed the days of a pensioner grabbing an S1 and heading off to the sun on their pensions might be gone for some.

It will make little difference to me as all my planning assumes I'll never receive a State Pension and also won't get access to an S1.

Of course I'm no expert here so please DYOR as I might have something wrong here...

[Longtermyieldman]

Does Cyprus impose a minimum property purchase value for non-EU citizens wishing to reside there?

[spiderbill]

EU countries? Will you still be able to?

I'd start making arrangements ASAP! Just in case May offends everybody.

In my case I bought my dream house in Slovenia three years ago and have had temporary residence status for 2.5 years (after five I can get permanent). Their tax arrangements aren't as good as Cyprus sounds, but the cost of living is good and there are plenty of other positives (fresh food that tastes wonderful, gorgeous wines, delightful neighbours). I'll be glad to be rid of UK politicians and zenophobes for good.

[mickeypops]

As for the Dividend tax cut, it will have an impact on me and Mrs MP when we FIRE next year (not as early as I would have liked, but there you are.)

We will find ourselves with about £200K in unsheltered cash, mostly from 25% TFLS from our DC pensions. I plan to split it between us and invest in ITs yielding around 4.5%, or £4,500 each, within the old £5K allowance.

The reduction to £2,000 will cost us £375 extra in tax between us in year one at 7.5%, but I will bed and ISA to the max so in a few years this should disappear.

So, not the end of the world, but a bit of a nuisance. I do wish they'd stop fidlding around every year with all this though - most annoying.

[JohnB]

Yes, now I'm FIRE my unsheltered dividends are about £17k, with p2p income of £5k, I will be over and have to pay £225 p/a more. But that's a small change, there are many worse things the Chancellor could have done. I'll carry on sheltering, but am likely to focus on getting all my p2p, with its 10% returns, into an innovative finance ISA when they finally launch properly, as 20% of 10% is much more than 7.5% of 3.5%