Budget 2015: Dividend tax system to be overhauled

Budget 2015: Dividend tax system to be overhauled

Over 1m people are expected to recieve a tax cut after George Osborne announced a major overhaul of the tax system on dividends.

The chancellor today said the dividend tax credit was to be replaced with a “tax-free allowance of £5,000” for all taxpayers on dividend income.

Dividends received above that amount will be taxed at 7.5 per cent, 32.5 per cent or 38.1 per cent, depending on the individual’s tax band.

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The changes are set to come into force in 2016.

The chancellor confirmed dividends received within pensions or individual savings accounts (Isas) would remain tax-free.

Mr Osborne said the changes would result in a tax rise for those with portfolios of more than £140,000, but would lead to either a reduction in tax or no change to 85 per cent of savers and he predicted 1m people would see lower taxes on dividends as a result of the changes.