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Millions more savers to pay dividend tax after allowance cuts, HMRC data finds | Trustnet Skip to the content

Millions more savers to pay dividend tax after allowance cuts, HMRC data finds

11 August 2025

A large portion of the tax burden falls on basic rate taxpayers.

By Emmy Hawker,

Senior reporter, Trustnet

The number of investors expected to pay dividend tax has soared to 3.7 million for the 2024/25 tax year, according to HMRC figures. This is double the number recorded just two years earlier, thanks to successive cuts to the dividend tax-free allowance.

The dividend tax-free allowance was reduced from £2,000 to £1,000 in April 2023 and halved again to £500 in April 2024.

HMRC’s data – which was provided to Quilter following a Freedom of Information request – underlined the extent to which these cuts impacted savers, with number of people paying tax on their non-ISA investments rising from 1.9 million in 2022/23 to around 3.1 million in 2023/24 and now 3.7 million for 2024/25.

Rachael Griffin, tax and financial planning expert at Quilter, said: “These figures show just how quietly but effectively the tax net is expanding.

“What was once a niche tax affecting a relatively small group of higher earners and business owners is now impacting millions of everyday investors, many of whom are basic rate taxpayers.”

HMRC’s original estimations suggested that 635,000 individuals would be brought into the dividend tax net in 2023/24 and a further 1.1 million the following year. The reality pushes these figures to 865,000 and 480,000 respectively. Although lower than feared, it still amounts to more than 1.3 million additional taxpayers across the two-year timeframe.

HMRC has forecast the cut to £500 in April 2024 will raise £450m in 2024/25, increasing to £810m the following year, £860m in 2026/27 and £940m in 2027/28.

“The government has made clear that it expects to raise hundreds of millions in additional revenue from these changes and the figures show it is well on track to do so,” said Griffin.

However, the cost isn’t just financial, she said. “The complexity of compliance is growing, particularly for those unfamiliar with the tax system. This policy seems at odds with Labour’s desire to get more people investing.”

A large portion of the tax burden is falling on basic rate taxpayers, with HMRC estimating that 2.2 million basic rate individuals had taxable dividend income and 1.1 million expected to owe dividend tax in 2024/25.

Many of those affected by these dividend tax changes will not need to register for self-assessment, HMRC confirmed, as the tax can typically be collected through PAYE or simple assessment. However, some may need to file a return to settle their liability.

Griffin said: “As interest rates start to fall and the appeal of cash wanes, more people will look to investing as a way to grow their money. But the tax environment is becoming harder to navigate.

“Making full use of ISAs, pensions and other tax-efficient wrappers has never been more important, especially for those supplementing their income or planning to pass on wealth to the next generation. Seeking financial advice if you are unsure is critical.”

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