GET AN ESTIMATE

Budget 2025: Potential Incoming Changes to Dividends & ISAs

VIEW CATEGORIES
VIEW ALL

Bright Insights: Autumn Budget 2025

At Bright Solicitors, we keep a close eye on investment reforms so our clients (especially business owners) can stay ahead of the curve. 

With the Autumn Budget fast approaching (to be announced on the 26th of November), here’s what might be coming down the line for ISAs and dividend taxation, and what it could mean for you. 

ISA Reform: A Push Towards Equities? 

The Chancellor is reportedly considering changes to encourage more investment in UK businesses: 

  • Cash ISA Limit Cut: The cash ISA limit may be halved from £20,000 to £10,000, while keeping the overall ISA allowance at £20,000. This could nudge savers toward stocks & shares ISAs. 
  • UK-Only Equity ISA: A new ISA focused solely on UK-listed equities may be introduced to boost domestic investment. 
  • Lifetime & Junior ISAs: No confirmed changes yet, but government contributions and limits may be under review. 

What this means for you: If you’re planning to raise capital or issue shares, these reforms could influence investor behaviour and eligibility for tax-efficient investment. 

Dividend Tax Under Scrutiny 

  • Dividend Allowance: Already reduced to £500 in April 2024 and expected to stay there. 
  • Higher Tax Rates: The top dividend tax rate could rise from 39.35% to 45%, pushing the effective rate (after corporation tax) to nearly 59% for high earners. 
  • Mandatory Disclosure: From 2025/26, dividends must be disclosed separately on self-assessment returns. HMRC may target alphabet share structures used to vary dividend payouts. 

Implications for Private Companies: 

  • Directors may shift from dividends to salaries or bonuses, despite higher NIC costs. 
  • Alphabet shares may face scrutiny- review your share classes now. 
  • Dividend payouts may decline, especially in family-run firms. 
  • Spousal transfers remain a useful strategy to reduce tax exposure. 

What You Can Do to Prepare 

Here are a few practical steps private companies can take now: 

  • Review your share structure and dividend policy- especially if you use alphabet shares. 
  • Model tax scenarios comparing salary vs dividend extraction. 
  • Forecast retained earnings and reinvestment capacity. 
  • Prepare for new reporting rules in self-assessment returns. 
  • Evaluate ISA eligibility for any upcoming equity offerings. 

Need Help Navigating the Changes? 

Our Corporate Department is here to help you prepare for what’s next. Whether you’re reviewing your dividend strategy or updating your shareholder agreements, we’ll guide you through the legal implications with clarity and confidence. 

Follow us for more legal insights or contact our Corporate Department for more information.