Dividend tax payers double over last three years as bill soars to £18bn
The number of people expected to pay dividend tax has almost doubled over the last three years, new data has revealed.
Around £18bn is expected to be brought in from the dividend tax in the 2024/25 financial year, according to a Freedom of Information request from AJ Bell, with almost 3.6 million taxpayers forking over for the tax.
The tax-free dividend allowance has been cut twice over the last year and a half, in both April 2023 and 2024, down from £2,000 to £1,000 and then £500.
This has led to a sharp increase in the number of people eligible to pay the tax.
AJ Bell data revealed that many who are set to pay the dividend tax are actually basic-rate taxpayers, though they noted that many have only just breached the allowance, meaning they won’t have a huge bill to pay.
A fifth of all higher-rate taxpayers will now pay dividend tax, with an average bill of £5,379 each, while additional rate taxpayers will see an average bill of £32,578.
Laura Suter, director of personal finance at AJ Bell, said: “If your investment portfolio is yielding 5 per cent, you need to have £10,000 invested to hit the tax-free limit.
“The number of basic-rate taxpayers paying the tax is estimated to hit 1.7 million this year – more than treble what it was three years ago. Now one in 17 basic-rate taxpayers will have to pay dividend tax, compared to one in 50 just three years ago.”
“Looking at the average dividend tax bill over the years we can see that more taxpayers with smaller portfolios have been pulled into paying the tax. In 2021-22 the average dividend tax bill for a basic-rate taxpayer was £780 but this has now dropped to £385 – despite dividend tax rates rising during this period.”
| Tax year | Savings rate | Basic rate | Higher rate | Additional rate | Total |
| 2020-21 | 623,000 | 553,000 | 529,000 | 109,000 | 1,810,000 |
| 2021-22 | 598,000 | 545,000 | 556,000 | 132,000 | 1,830,000 |
| 2022-23 | 436,000 | 696,000 | 888,000 | 147,000 | 2,170,000 |
| 2023-24 | 434,000 | 1,310,000 | 1,050,000 | 270,000 | 3,070,000 |
| 2024-25 | 434,000 | 1,670,000 | 1,160,000 | 320,000 | 3,580,000 |