Dividend tax expected to hit record £17.8bn this tax year

Dividend tax expected to hit record £17.8bn this tax year

The number of people expected to pay dividend tax in the current tax year is likely to have doubled in just three years as the tax-free allowance is slashed.

The Treasury has estimated it is set to raise nearly £18bn from dividend tax this year alone, with an average bill of £4,973, which is up over £3bn from £14.7bn in 2021-22.

Continual cuts in the dividend allowance to the current £500 will see nearly 3.6m taxpayers pulled into the tax in 2024-25, with the tax-free dividend allowance cut twice, in April 2023 and April 2024 to £1,000 and £500 respectively, leading to a marked increase in the volume of people paying the tax.

Many basic rate taxpayers who are only just breaching the allowance will still be required to file a self assessment tax return, which highlights how increasing tax complexity will create further demand for HMRC services.