The Chancellor has taken a sharper pencil to investment income as part of her effort to make "the wealthiest pay their share".
In her Budget, tax rates were lifted on dividends, property and savings income by two percentage points from April 2026, a move expected to raise £2.1 billion but one that has set nerves jangling across the City.
On the other side of the coin, there was a three-year stamp duty exemption for shares in newly listed companies.
The basic rate on dividend income will rise from 8.75% to 10.75%. Higher-rate taxpayers will see their charge move from 33.75% to 35.75%.
At a time when ministers say they want more people investing and more companies choosing London for their listings, the optics look awkward.
Wealth managers were quick to point that out. Jason Hollands of Evelyn Partners said the last thing the UK needs is more tax on investment and entrepreneurship.
He welcomed the stamp duty boost for IPO shares but questioned why the Treasury would raise taxes on dividends, which have long been one of the biggest attractions of the UK equity market.
Sarah Coles at Hargreaves Lansdown went further. She said the increase flies in the face of efforts to encourage investors to own UK shares. London is packed with solid income stocks, she noted, which now face harsher tax treatment if held outside an ISA or pension.
Her worry is simple enough. Make investing less rewarding and people will either put their money elsewhere or avoid the market entirely. The UK already underinvests. Higher dividend taxes risk making a thin market thinner.
The broader question is how companies respond. Dividends are now a little less appealing for investors outside tax shelters. Buybacks, by contrast, sidestep personal tax until gains are realised.
Companies have been leaning on buybacks for years as a flexible way to return cash. These changes may tilt the balance further in that direction, particularly for large caps that already juggle both tools.
Still, the jury is out. Some boards prefer the signalling power of a dependable dividend and are reluctant to tamper with expectations. Others will run the numbers and decide buybacks look cleaner in a world where distributions are taxed more heavily.
What is clear is that the government is trying to boost investment while also raising revenue, and those two aims do not always pull in the same direction.
Investors will now be watching how companies adjust. The policy may end up encouraging the very behaviour the chancellor was hoping to avoid.