We had the second budget of the year this week was much heralded as the first fully Tory budget for around 20 years. However it was quite strange and looked more like a budget from a coalition with Labour to me as he seemed to raid some of the tax changes Red Ed had proposed before the election. Then as George became Red George he even decided to intervene in the markets by forcing employers to pay what he called the living wage - I reckon Maggie Thatcher will be spinning in her grave!
The other surprising thing from a Tory chancellor and the one significant thing for income investors in the Budget was the change to the taxation of dividends. He scrapped the dividend tax credit from April next year and introduced from the same date a new £5,000 tax free allowance fro dividend income. This is supposed to encourage people to invest, but will mean a tax hike for more wealthy investors who have portfolios that earn more than £5,000 per annum in dividend income.
I shared this article on Twitter recently and it generated quite a bit of discussion. So just in case you're not on Twitter I thought I'd add it here. It gives a good explanation of the effects of the changes and discusses the best ways to use the various allowances that are available. Obviously makes sense to use your ISA allowance as a result of this if you can afford to and them at least beyond that your first £5,000 of income will be tax free.