London markets dragged down by tax hikes as City mulls impact on portfolios

The wave of tax hikes launched by prime minister Boris Johnson weighed on London markets today as investors mulled the implications of higher dividend taxes on their portfolios.

The capital’s premier index dropped 0.75 per cent to close at 7,095.53 points, while the mid-cap FTSE 250 slid 1.03 per cent to 23,848.89 points.

Markets were spooked by prime minister Boris Johnson launching a 1.25 percentage points hike to dividend taxes yesterday in a bid to raise funds to clear the swelling backlog of NHS work and fix England’s ailing social care system.

There are concerns the hike will make it relatively less attractive to hold shares in UK listed companies. The increase will also hit entrepreneurial activity in the UK due to it becoming more costly for small business owners and company directors to pay themselves through dividends.

Moira O’Neil, head of personal finance at Interactive Investor, said: “Targeting dividends is a kick in the teeth for people who are prudently investing for the long term in companies that reward shareholders with regular payments.”

The governor of the Bank of England, Andrew Bailey, also gave evidence to the Treasury Committee today, in which he revealed he believed the forward guidance for tightening quantitative easing had been met after markets had closed.

AIM shares dipped 0.54 per cent to 1,303.08 during opening exchanges.

Winners and losers

Gains were tempered on the blue-chip index today, although value retailer B&M was an outlier, shooting up 6.92 per cent after it upped its financial forecasts for the year.

Engineer Smiths Group also fared well today, gaining 2.57 per cent to reach 1,459p.

Sharp losses among housebuilders dragged the capital’s premier index down after data published by Zoolpa this morning showed London rents are plummeting.

Taylor Whimpey, Persimmon and Barratt Developments all plummeted over 3.4 per cent today.

The dividend hike weighed on investment platforms listed on the mid-cap FTSE 250 index. CMC Markets lost 2.86 per cent and AJ Bell was down 0.28 per cent. Hargreaves Lansdown also lost 0.30 per cent to close at 1,480.50p.

Around the world

London’s poor performance was extended across the pond, with the US’s three main benchmarks all down after the morning session.

The S&P 500, Dow Jones and Nasdaq lost 0.22 per cent, 0.21 per cent and 0.67 per cent respectively.