Dividend tax increase could hit 2.5m investors for more than £3billion over five years, experts warn


Dividend tax increase could hit 2.5m investors for more than £3billion over five years, experts warn

  • 1.25% increase in dividend tax will hit 2.5m savers by an average of £355 a year
  • Dividend income from stock market investments is taxed on more than £2,000 
  • Increase will hit two out of five investors whose dividend payments are not sheltered from the tax in an ISA or in a pension










A raid on share dividends will cost investors more than £3billion over the next five years.

The 1.25 per cent increase in dividend tax will hit around 2.5million savers by an average of £355 a year, Budget papers revealed.

Savers who receive dividend payments from their stock market investments are taxed on income of more than £2,000.

The increase will hit nearly two out of five investors whose dividend payments are not sheltered from the tax in an ISA or in a pension.

The 1.25 per cent increase in dividend tax will hit around 2.5million savers by an average of £355 a year, Budget papers revealed (stock image)

The 1.25 per cent increase in dividend tax will hit around 2.5million savers by an average of £355 a year, Budget papers revealed (stock image)

The rise, which comes into force from April, will see basic rate taxpayers pay dividend tax at 8.75 per cent and higher rate taxpayers at 33.75 per cent on dividend income of more than £2,000. 

Those earning more than £150,000, known as additional rate income taxpayers, will now pay 39.35 per cent on dividends, up from 38.1 per cent.

An entrepreneur taking £45,000 per year in dividends is likely to see their tax bill increase by £378, while a small business owner receiving £75,000 in dividends could pay an extra £753.

The rise, which comes into force from April, will see basic rate taxpayers pay dividend tax at 8.75 per cent and higher rate taxpayers at 33.75 per cent on dividend income of more than £2,000 (stock image)

The rise, which comes into force from April, will see basic rate taxpayers pay dividend tax at 8.75 per cent and higher rate taxpayers at 33.75 per cent on dividend income of more than £2,000 (stock image)

The Government said the increase would affect mostly men, and just 16 per cent of those hit will be over state pension age. The move could also hurt company directors who pay themselves in dividends.

The tax rise was first revealed in September. At the time Mike Cherry, chairman of the Federation of Small Businesses, said: ‘Business owners… are being punished with a fresh assault on dividend revenue.’

The new tax regime will cost HM Revenue & Customs around £530,000 to upgrade its IT systems. 



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Written by Bourbiza Mohamed

A technology enthusiast and a passionate writer in the field of information technology, cyber security, and blockchain

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