Another disappointing result for DIY corporate financiers this week. Having hosted the ‘Fair Sale’ over itself nearly two years ago, Residential Secure Income (LSE: RESI) has announced that most of its assets are set to be acquired by the Social Housing REIT (LSE: SOHO).
SOHO will get RESI’s retirement home portfolio, with the rump of RESI’s assets going to a currently unnamed bidder.
The mostly paper-based deal values RESI at about 57p per share, depending on movements in SOHO’s share price.
There are a few moving parts to the deal. But the point to note is that RESI was priced at about 60p a share in October 2024 when it first announced it was winding itself down. Hence this has hardly been a barnstorming return for anyone who bought into the REIT 1 in hopes of unlocking value.
Moreover, RESI’s tangible NAV 2 was nearer 80p in late 2024, compared to c.63p at the last count. RESI did sell a different chunk of its portfolio in early 2025, but that all went on debt repayment.
So its managers have presided over a shrinking asset base that’s ultimately been sold at a still-meaningful discount to NAV.
The total return situation isn’t quite as dispiriting. RESI yields over 7%, so when you take dividends into account investors were at least paid to wait for their mediocre outcome.
RESI’s managers would no doubt stress too that shareholders who keep their SOHO shares after the sale completes will retain ongoing exposure to RESI’s attractive (and discounted) assets, via the newly enlarged parent.
But still, this is hardly the sort of outcome that Joel Greenblatt touted in his classic book You Can Be A Stock Market Genius, when he explained how ordinary investors can profit from corporate activity in the public markets.
REIT petite
I wrote about the opportunity in RESI for Moguls in January 2025. In the same post I also highlighted that Abrdn European Logistics Income (LSE: ASLI) was on the block, too.
The ASLI outcome was a bit better. Shareholders should eventually get around a 20% return from memory, once the protracted endgame is over.
(Surely we can also all rejoice any time an instance of the dreaded moniker ‘Abrdn’ is put out of its misery!)
But again, the ASLI wind-down did not release vast swathes of value. And that has been the trend with this REIT consolidation that began after the yield-driven rout of 2022.
Cut-price deals: everything must go
A.J. Bell recently published a handy roundup of all this REIT sales and merger activity, and the premiums – or otherwise – achieved:
Source: Company accounts / A.J. Bell
Note: Negative moves/premiums in brackets.
While these actions spurred some worthwhile-ish share price pops, they have nearly all seen assets taken out at a big discount to NAV. Which I suppose isn’t surprising in hindsight, given the huge discounts that even the largest and most liquid UK REITs still trade on.
This suggests two things.
Firstly, there are not many buyers for these property assets – either from the public or private domains.
Secondly, neither the market nor the companies themselves consider these commercial property NAVs as anything like gilt-edged. They are more, as the pirate’s code puts it, guidelines.
Clearly, fears and uncertainties still abound – six years after Covid plunged the future of commercial property into doubt, three years after interest rate rises did a number on the economics, and a couple of years into A.I. making everyone nervous about what the future of humans at work really looks like anyway.
The REIT stuff
When a sector is this unloved, it’s hard to remember it wasn’t always so. But the real estate sector’s status as stock market booby prize isn’t a law of nature.
Throughout the 1990s and the early 2000s, property was lauded as a halfway house between bonds and equities.
The pitch? You got the attractive income of bonds and some of the capital gains of shares, with a dose of inflation-hedging thrown into the mix, too. Back then even passive investors saw the value of adding REIT exposure to their portfolios. They hoped for a bit of lower-risk additional diversification.
Property developers thrived as much as the steadier landlords. Money was cheap, and as global capital searched for more touchy-feely returns following the Dotcom crash, prestige skyscrapers began to sprout across the world’s major cities, minting millions.
It’s hard to believe nowadays, but many UK REITs and blue chip property developers actually used to trade at a premium to NAV!
Confident investors anticipated valuation gains and higher incomes, and they were happy to front run them.
Bargain buildings
That all ended with the financial crisis, however, and the asset class has never recovered. Big discounts to NAV for commercial property REITs abound.
Here’s how the UK bellwethers trade compared to their assets:
| Company | Market cap | Price / NAV | Discount |
| Segro (LSE: SGRO) | £10bn | 744p / 925p | (20%) |
| Land Securities (LSE: LAND) | £4.7bn | 629p / 882p | (29%) |
| LondonMetric (LSE: LMP) | £4.3bn | 182p / 201p | (9%) |
| British Land (LSE: BLND) | £4.1bn | 401p / 590p | (32%) |
Source: Company reports / Prices as of 18 June 2026
Imagine walking around town and seeing giant 30%-off labels slapped across the frontages of office blocks and shopping centres. That’s effectively what you get with most REITs – large and small – today. £10 of assets on sale for £7 or less.
LondonMetric – which has driven much of the sector consolidation that we began with – is on a narrower discount, true. Partly that’s thanks to its stronger balance sheet and tighter terms with tenants.
But I’d also argue LondonMetric has won investors over by telling a better story. That’s what the rest of the REITs need to do. (And ideally for it to be true, of course!)
REIT-sizing exposure
Even my co-blogger, The Accumulator, gave me stick about REITs the other day.
Apparently I’d persuaded TA that he should keep them in our Slow & Steady portfolio when he soured on the asset class.
It was a few years ago, but he hadn’t forgotten!
TA’s disenchantment with REITs will be driven more by revisiting the historical record than by the sector’s recent travails. All the same, if REITs were multi-bagging like semiconductor stocks I wonder if there’d be quite so much soul-searching?
Equally, I think I suggested we retain them more due to my bias against fussing too much with a model portfolio than out of conviction that the asset class was cheap.
Still, maybe this is another signal?
Most things in investing are cyclical. When even diehard passive investors are ready to throw in the towel, perhaps the bottom is near.
Most of the major REITs have been doing a lot better of late. Rents are up, and even office valuations are stabilising, if not rising. Albeit more for the top-end stuff.
The surviving players have navigated a once-in-a-generation interest rate shock, too.
Real estate investment vehicles invariably carry a lot of debt. So when interest rates spiked it not only made their dividend payouts relatively less attractive and pressured their tenants – it also stressed their own balance sheets.
The past three years saw debts refinanced and restructured though, and to my mind the big REITs now look pretty solid. They’ve even begun to invest in new developments.
Improving cashflows underpin generous dividend yields of 4-7% for the REITs in my table. I’d say that’s attractive, given there’s an inherent ability to respond to inflation (compared to vanilla bonds) and the prospect – eventually – of more capital growth.
Priced for imperfection
While I might keep my shares in SOHO when the RESI deal completes, I think I’m more inclined to look at the stronger REITs than to punt again on the little guys being taken over.
With hindsight, it was optimistic to expect the smaller prey to get acquired at close to NAV when the big predators themselves were still badly limping.
Sector consolidation was necessary – too many sub-scale REITs were launched in the near-zero interest rate era. But investors aren’t being rewarded for the extra risks.
In contrast, the big REITs will hopefully see continued strong dividends and eventually some more share price growth. And there’s the prospect of a double-whammy gain if property valuations increase even as discounts narrow to meet those rising NAVs.
Of course, there are risks – everything from the sorry state of the UK economy and politics to the need to upgrade old offices to comply with environmental standards to AI threatening to send white-collar workers to not-work-from-home forever.
But the discounts likely reflect a lot of these dangers, given the underlying metrics are now improving. And to the upside, with oil flows set to resume through Hormuz and inflation risks hopefully contained, we might eventually even see more interest rate cuts.
That’d really help refurbish the appeal of property. Just ask Donald Trump!
The last few years have seen dividend tax rates steadily rise.
At the same time investors have seen a massive reduction in the already miserly tax-free dividend allowance.
Let’s update ourselves on where dividend tax rates and allowances now stand. We’ll then briefly consider how we got here, and what you can do about it.
Dividend tax rates and allowances
The rate of tax you’ll pay on your dividends depends on your income tax band.
UK dividend tax rates are currently:
- Basic-rate taxpayers: 10.75%
- Higher-rate taxpayers: 35.75%
- Additional-rate taxpayers: 39.35%
The basic and higher rates were increased on 6 April 2026.
Note that depending on your total earnings – and where it comes from – you could pay tax at more than one rate on your income.
Importing note: we’re talking here about dividends paid outside of tax shelters. Dividends paid within ISAs and pensions are ignored with respect to tax. Are you adding up your dividends for your tax return? Don’t include dividends paid in ISAs or pensions – forget about them when it comes to tax! (Remember them when it comes to reinvestment to get rich.)
The tax-free dividend allowance 2026 to 2027 and beyond
Back in April 2024, the annual tax-free dividend allowance was halved to just £500.
It’s still stuck there today. Yet another frozen tax threshold!
The good news is that this £500 dividend allowance means you at least escape dividend tax on your first £500 of dividend income.
Dividends you receive within this tax-free dividend allowance are not taxed, irrespective of how much non-dividend income you earn and your tax bracket. But breach the allowance and the rest is taxed, as per your income tax band.
Like other tax allowances such as the personal allowance for income tax, the dividend allowance runs over the tax year. (From 6 April to 5 April the next year).
(Incidentally, if you recall the allowance being much more generous, you’re right. It has been slashed over the past few years. More on that below.)
What are dividends, anyway?
Dividends are cash payouts made by companies:
- You may be paid dividends by shares listed on the stock market or by funds that own them.
- You might also be paid dividends from your own limited company, as part of your remuneration.
As mentioned, dividend tax is only applied on dividends paid outside of a tax shelter.
Hence using ISAs and pensions is key to shielding your income-generating assets from tax for the long-term.
What tax rate will you pay on your UK dividends?
If your dividend income exceeds the tax-free dividend allowance, you’ll pay tax on the excess.
This liability must be declared and paid through your self-assessment tax return.
For example, if you received £6,000 in dividends in a year, then tax is potentially charged on £5,500 of it. (£6,000 minus the £500 tax-free dividend allowance).
The rate you’ll pay depends on which tax bracket your dividend income falls into.
Beware of being bounced into a higher tax band
If you own dividend-paying shares outside of an ISA or pension, then dividends may increase your taxable income. Perhaps by enough to push you into a higher tax bracket.
If you own funds outside of tax shelters, you could also owe tax on reinvested dividends. Choosing accumulation funds doesn’t spare you the tax rod – unless they’re safely bunkered in your tax shelters.
The lesson again is to avoid taxes reducing your returns by using ISAs and pensions.
Watch out for withholding tax on dividends
If you’re paid dividends from overseas companies, you may be charged tax on them twice. Once by the tax authorities where the company is based, and again by His Majesty’s finest in the UK.
You may even pay this withholding tax on foreign dividends held in an ISA or pension.
However there are reciprocal tax treaties between the UK and some other countries. These can reduce the total amount of dividend tax you pay.
Your broker should take care of this for you. (Check though!)
Some territories do not charge withholding tax on dividends received in a UK pension. The US most notably. (This kindly treatment doesn’t apply to ISAs. Choose where you shelter your US shares accordingly.)
Again, make sure your platform is paying you any US dividends in your pension without any tax having been charged.
It can all get a bit fiddly. See our article on withholding tax.
Why was the old dividend tax system changed?
Then-chancellor George Osborne revamped UK dividend taxation back in the summer budget of 2015.
Osborne apparently wanted to remove the incentive for people to set themselves up as limited companies and then use dividends as a more tax-efficient way to get paid, compared to salaries.
Osborne also said the changes enabled him to reduce the rate of corporation tax.
Whatever his intentions, today’s regime applies equally to all dividends – whether received from ordinary shares or from limited companies.
Even worse, an initially fairly-generous dividend allowance of £5,000 – designed to prevent small shareholders being taxed on legacy portfolios – is now just £500.
At the same time dividend tax rates have ratcheted higher. Notably in 2022, when the rates were increased by 1.25 percentage points, and then in 2026, when the basic and higher rates were lifted by another two percentage points.
I hope you’re keeping notes at the back.
Admittedly, small investors have generaly not been hit by these changes. That’s because most of us hold our shares within ISAs and pensions, so we’re not affected by dividend taxation.
However there are exceptions.
Business owners paid a dividend by their limited companies now pay more tax. Their salary-sized dividends quickly chew through the £500 dividend allowance.
There is also a dwindling cohort of older investors who built up big portfolios of income shares outside of ISAs and pensions. They’re paying far more tax on dividends, too.
Always use your tax shelters
For years I urged such dividend-focused investors to move as much money as possible into ISAs.
They could have done this by defusing gains to fund their ISAs every year, for example.
Early action was important because the annual ISA allowance is a use-it-or-lose-it affair. Hence you must build up your total ISA capacity over many years.
Yet inexplicably to me, some of those unsheltered dividend investors argued – even in the Monevator comments – that there was no point.
Dividends were not taxed until you hit the higher-rate band, they said. So why bother?
Well, that was true under the old system. And maybe there was a hard choice to be made if you also had massive cash savings. In that case there was competition as to how to best to divvy up your annual ISA allowance.
But taxes on dividends were always vulnerable to change, like everything else in our convoluted tax code. And eventually they did.
At that point, the people who had declined to move some or all of their portfolios into ISAs – just to save a few quid – began to be hit with large tax bills.
I hate to say I told you so. (Truly – I run this blog to help people.)
ISA sheltering costs nothing. Even back then there was at most a trivial cost difference between an ISA and a trading account. Nowadays there’s usually none.
The moral of the story is to get any non-sheltered portfolios into an ISA (and/or a SIPP) as soon as possible.
Not only because of dividend tax, but also to shelter from capital gains taxes and future regulatory changes.
Note: Comments below may refer to old (or incorrect) dividend tax rates and allowances. Please check the dates if unsure.
The tax year runs from 6 April to 5 April the next year. This means that the most crucial UK tax deadline occurs every April.
That’s because there exist various annual allowances and tax reliefs that you need to make use of to legally mitigate your income tax bill and stop taxes devouring your investment returns.
Most of these are ‘use it or lose it’ allowances with a 5 April deadline.
It’s no good bemoaning in June that you should have filled your ISA allocation by 5 April, but you were too preoccupied by the Donald Trump Show or the Six Nations rugby!
No point cursing if you create a £500 capital gains tax liability in July that you might have defused in March!
Ch-ch-changes
Of course you read Monevator. You know this kind of stuff. But it’s still all too easy to overlook something.
Especially when the tax rules keep changing! (For example, the basic and higher rates of dividend tax were increased in April 2026. Remember?)
Let’s run through a checklist of what to think about as the UK tax deadline draws near.
Follow the links in each section to go deeper.
ISA allowance
The annual ISA allowance is the maximum amount of new money you can put each year into the range of tax-free savings and investment accounts that comprise the ISA family.
The ISA allowance for the current tax year to 5 April is £20,000.
You cannot carry forward or rollback this ISA allowance. What you don’t use in the tax year is lost forever.
ISAs are a superb vehicle for growing your wealth tax-free. But the fiddly rules – seemingly made up by a bureaucrat with a grudge against mankind – are subject to change over time.
Watch out for rule tweaks
For example, as of the 2024-25 tax year you can open multiple ISAs of the same type in the same tax year.
Previously you could only open one new ISA of each type in a tax year.
Note though that you can only contribute £20,000 in total to your ISAs a year – old or new. And it’s down to you to keep track of your running total.
Also, you can still only pay into one Lifetime ISA per year. The maximum contribution here is £4,000. This counts towards your £20,000 annual ISA allowance.
Another recent-ish change is that you can now make partial ISA transfers – although not all platforms will accept them. (Under the old rules, if you contributed to an ISA and then wanted to transfer the funds to a different provider in the same tax year, you had to transfer all of that year’s ISA contributions).
And another: fractional shares can now be held in a stocks and shares ISAs. They’re listed as ‘fractional interests’ on this page of qualifying investments.
My co-blogger wrote the definitive guide to the ISA allowance.
Pension contributions annual allowance
There is a limit to how much money you can contribute to your pension in a given tax year while still receiving tax relief on those contributions.
It is sometimes referred to as the pension annual allowance.
Despite massive speculation with every Budget, the allowance is still £60,000. 1
Also note that unused pension annual allowance can generally be carried forward for up to three tax years, subject to the usual pernickety conditions you always see with pensions and taxes. (Hargreaves Lansdown has a decent guide).
Note that the rules about inheritance tax and pensions were thrown into the Magimix blender in late 2024:
Pensions put off taxes
Saving into a pension is mostly a tax-deferral strategy. That’s because you’re eventually taxed on pension withdrawals, unlike money you take out of an ISA tax-free.
In theory this makes ISAs and pensions equivalent from the perspective of tax.
In practice though, the fact that you can also draw a special tax-free lump sum from your pension gives pensions an edge in tax-terms – albeit at the cost of locking away your money for years.
Weigh up the pros and cons of each tax wrapper. We think most people should do both.
You can reduce your marginal tax rate by making pension contributions, if you can afford to go without the money today. Those on higher-rate tax bands should definitely do the maths:
Personal savings allowance
Under the personal savings allowance:
- Basic-rate taxpayers can earn £1,000 per year in savings interest without having to pay tax.
- Higher-rate taxpayers can earn £500 per year.
- Additional rate taxpayers don’t get any personal savings allowance.
Back when interest rates were very low, these savings allowances seemed quite generous.
But rising rates have changed everything. Even interest on unsheltered emergency funds can now take you over the personal savings allowance and see some of your interest being taxed.
Redo your sums. Higher-rate taxpayers should look into holding low-coupon short duration gilts instead. Recently these have offered a lower-taxed alternative to savings interest.
Dividend allowance
The annual tax-free dividend allowance was reduced to £500 in April 2024.
Dividends you receive within the tax-free dividend allowance are not taxed. But breach the allowance and you’ll pay a specific dividend tax rate on the rest, according to your income tax band.
You can avoid the whole palaver by investing inside an ISA or pension.
Capital gains tax allowance
Everyone has an annual capital gains tax allowance, or ‘annual exempt amount’ in the lingo of HMRC.
This allowance was halved to £3,000 from 6 April 2024.
It is still (for now) frozen at this level.
Capital gains tax is levied on the profits you make when you sell or transfer most assets. These assets include everything from shares and buy-to-let properties to antiques and gold bars.
You can shield your stock market gains from capital gains tax by investing within ISAs and pensions. Go re-read the relevant bits above if you skimmed them!
EIS and VCT investments
You can also reduce your taxes by investing in Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS).
These vehicles are mostly marketed at wealthy high-earners for whom the large income tax breaks are attractive.
But be aware that these tax reliefs come with all kinds of risks, rules, and regulations.
VCTs
VCTs are venture capital funds run by professional managers who make investments into startup companies.
But somewhat quixotically, VCTs don’t even pretend to try to deliver high venture-style returns for investors.
Instead they aim to return cash via steady tax-free dividends.
You can invest up to £200,000 a year into VCTs. You must then hold them for at least five years to keep your 20% income tax relief.
(The tax relief rate was lowered from the longstanding 30% in April 2026).
VCT fund charges are invariably expensive, and the returns mostly mediocre – especially if you back out the tax reliefs.
EIS
EIS investing is even riskier than VCTs. Qualifying companies are usually very young, and many investors buy into them via crowdfunding platforms, rather than through professional fund managers.
The quality of these EIS opportunities is extremely variable, and information is usually scanty.
And while there have been a few big crowdfunded winners, the majority do poorly and often go to zero.
If you’re a baller who buys Lamborghinis before breakfast, you may already know you can put up to £1m a year into EIS investments. (Up to £2m if you’re investing in ‘knowledge intensive companies’).
You can also still knock 30% of your EIS investment amount as tax relief from your income tax bill – presumably because EIS investments are deemed riskier than VCTs – and there are other reliefs should things go wrong.
But you must hold EIS investments for three years to qualify for the tax relief – again a slightly better deal than with VCTs, presumably to compensate you for higher risk.
Most people shouldn’t put more than fun money into EIS or even VCT schemes, in our opinion. Certainly not unless they’re very sophisticated investors or getting excellent financial advice.
- The risks of Venture Capital Trusts
- What are Enterprise Investment Schemes?
- Running a 31-fold gain in pursuit of a 100-bagger
Check in on your tax band and personal allowances
The rate of income tax you pay depends on your total income from all sources. This includes salary, interest, dividends, pensions, property letting, and so on.
You add up all this income to get your total income figure.
You then subtract your personal allowance from the total to see which tax bracket you fit into.
Everyone starts with the same personal allowance, regardless of age:
- The personal allowance is currently £12,570
Your personal allowance may be bigger if you qualify for Married Couple’s Allowance or Blind Person’s Allowance.
However the Personal Allowance goes down by £1 for every £2 of income above a £100,000 limit. It can go down to zero.
For England, Wales, and Northern Ireland, the income bands after deducting allowances are:
| Income Tax Rate | Income band |
| Starting rate for savings: 0% | £0-£5,000 |
| Basic rate: 20% | £0- £37,700 |
| Higher rate: 40% | £37,701-£125,140 |
| Additional 45% rate | £125,141 and above |
Source: HMRC
Note: If your non-savings taxable income is above the starting rate limit, then the starting savings rate does not apply to your savings income.
Scotland has its own income tax rates.
As we’ve seen above, there are further allowances and reliefs for income from certain sources – such as dividends and savings – that can reduce how much of that particular income is taxable.
You can take steps such as making additional pension contributions or having a spouse hold certain assets to further reduce your taxable income or the highest rate of tax you pay.
Don’t make the UK tax deadline into a crisis
Scrambling to exploit these allowances before the tax year ends is not only stressful – it’s financially suboptimal.
If you had cash lying around that you might have put into an ISA earlier in the year, for example, then it could have been earning a tax-free return for months beforehand.
But don’t blush too hard if you find yourself in this position.
Most of us are similar, which is why we wrote this article – and why the financial services industry bombards us with ISA promotions every March.
Try to automate your finances to invest smoothly and intentionally over the year.
And remember that April also brings warmer weather and longer days. Life is about much more than money and taxes!
Save and invest hard, take sensible steps to mitigate your tax bill, and enjoy life like a billionaire with whatever you’ve got leftover.