DeVere Group: Budget could drag investors back to the 1970s

October 23, 2026

By Nigel Green, CEO of deVere Group

If Chancellor John Healey decides to raise dividend tax again in his first Budget on Wednesday 28 October, as is widely speculated, the UK might come even closer to the punishing 1970s regime that once taxed investment income at 98%.

Everyone’s bracing for a Budget day crash. I don’t think that’s where the damage lands. Markets look to have already priced in the bank surcharge. What they can’t price is the slow squeeze on every pound people earn from owning shares, holding savings, or letting property.

Dividend tax is fatally flawed, and we expect it could get worse still following the Budget. Britain already taxes dividends. Since 6 April, those held outside ISAs and pensions have been taxed at 10.75% for basic rate taxpayers and 35.75% at the higher rate, with the additional rate held at 39.35%. The tax-free dividend allowance has shrunk to £500, from £5,000 a decade ago.

A dividend comes out of profit that’s already been taxed. The company pays 25% corporation tax, then the shareholder pays again on what’s left. For a higher rate investor, almost 52p of every pound of profit ends up with the Treasury. Then Westminster wonders why Britain struggles to keep companies and capital at home. Punishing the people who own British businesses is a strange way to grow them.

Landlords and savers face higher bills too. From 6 April 2027, rental profits move onto separate property rates of 22%, 42% and 47%, with savings interest rising to the same levels. Both sit two percentage points above the rates charged on wages. Dividends, savings, and rents will all be taxed more heavily than a salary. We’ve quietly rebuilt the old divide between earned and unearned income, and Britain has been here before.

From 1973 to 1984, the UK levied a 15% investment income surcharge on dividends, interest and rents above roughly £2,000.  After Denis Healey’s 1974 Budget lifted the top rate to 83%, the highest slice of investment income was taxed at 98%. Geoffrey Howe cut that ceiling to 75% in 1979, and Nigel Lawson scrapped the surcharge entirely in 1984. It’s quite something that another Chancellor called Healey now holds the pen.

The last one presided over a 98% top rate on investment income, and wealthy families, entrepreneurs and their capital left in droves. Nobody’s predicting a return to 98%. But the direction of travel looks the same, and money moves far faster today.  In the 1970s, getting capital out of Britain meant exchange controls and paperwork. Now it takes an afternoon.

The Chancellor has reportedly ruled out raising capital gains tax, which deVere believes could leave investment income as an obvious target for a Treasury short of room. Nothing on dividends has been confirmed, and the Treasury says it won’t comment on speculation. We expect another turn of the screw on dividends and investment income could come, possibly as soon as Wednesday, because it’s politically easy.

Few voters march for shareholders. Yet those shareholders are retirees living off income portfolios, business owners paying themselves dividends and families saving for a deposit. Every rise means a taxable investor needs a bigger yield just to stand still. When enough investors demand that, prices of income shares can come under pressure even while the businesses behind them are performing well.

Income inside ISAs and pensions remains outside dividend tax, which makes structure more important than ever. Wrappers, how a company balances dividends against buybacks, and whether a yield is genuinely covered by cash all matter more now than at any point in 40 years.

Good planning keeps more of every pound working. But there’s a far better path, and the Chancellor could take it on Wednesday. Put income from capital and income from work back on a level footing, as Lawson did. Restore a meaningful dividend allowance. Recognise the corporation tax already paid.

Lawson proved in 1984 that when you stop punishing investment income, investment comes back. Britain has every ingredient to be the most attractive place in Europe to own a business and build wealth. It just needs a Chancellor willing to stop taxing success like a vice.