Dividend tax hits

1m investors face dividend tax bills for first time

More than 1m investors will pay tax on investment dividends for the first time from April as allowances are halved. Cutting the annual tax-free dividend allowance from £1,000 to £500 in the new tax year will mean a further 1.15m investors will be forced to pay income tax on money earned from dividends. Some 635,000 people were dragged into the tax net for the first time in the current financial year, according to figures provided by broker AJ Bell, following an earlier cut in the annual allowance in April 2023 from £2,000 to £1,000. Laith Khalaf, AJ Bell's head of investment analysis, said Chancellor Jeremy Hunt is sending “mixed messages” to investors at a time when he wants more people to invest in British companies. He said: “At the same time as promoting investing, they're also implementing tax reforms that will punish investors, and introduce hundreds of thousands to the unpleasant process of completing a tax return.”