The UK’s economic picture remains uncertain ahead of the Autumn Budget and with the economy growing at a very slow pace, investors and taxpayers are feeling the pinch with a record number set to face a Dividend Tax bill.

According to HM Revenue and Customs (HMRC) figures obtained by Quilter via a Freedom of Information request, a record 3.7 million individuals and investors will be paying dividend tax during the 2024/25 tax year, double the amount paying during the 2021/22 tax year.

The numbers paying Dividend Tax is rising because of several cuts to the tax-free allowance which has pushed investors beyond the threshold.

With figures rising, the economy remains fairly stagnant with very little growth recorded in 2025. The economy grew by 0.7 per cent in the opening quarter of 2025 and with investors feeling the pinch, growth opportunities seem limited.

What are the numbers behind the record Dividend Tax figures?

While the Dividend Tax rate hasn’t changed, the threshold has been decreased on several occasions which unsurprisingly, has led to increased numbers of individuals paying tax.

According to HMRC’s figures, at the beginning of 2018, the tax-free allowance sat £5,000 but fast forward seven years and the allowance now sits at £500. Sharp cuts across both Conservative and Labour governments have dragged more investors into the mix and liable to pay a tax bill.

The gradual cuts have seen the Dividend Tax payers increase. In 2020/21, 1.8 million individuals paid Dividend Tax and that figure is predicted to double in 2024/25, to reach 3.7 million.

It is expected to continue rising as individuals and investors become liable because of the Government’s consistent cuts on the tax-free allowance.

The Government will argue the continued cuts are necessary to help balance the books and find resources to stimulate economic growth. The latest figures suggest HMRC expect to collect over £450 million during 2024/25 with that figure to hit £810 million in 2025/26.

Why are taxpayers feeling the pinch?

The reality of continued cuts places further pressure on basic taxpayers who may find themselves paying Dividend Tax in the future.

Traditionally, a much smaller tax focuses on high level investors and earners, HMRC are suggesting more basic taxpayers are becoming liable for Dividend Tax leaving them with further bills to pay and reducing their intake.

During the 2024/25 tax year, HMRC believe over 2 million basic taxpayers will be paying Dividend Tax and again, this is expected to continue rising as more taxpayers become liable.

It is another tax which could hit all taxpayers hard and presenting further challenges. Chancellor Rachel Reeves is trying to encourage economic growth and push people to invest but the reality is, the tax pressures make investing complicated.

Concerned about how this could affect your finances?

If you are concerned your finances and increased tax pressures, speak with financial experts who can provide you with all the information and tools you need.

A financial expert will provide tailored advice to help you understand your current financial position, discuss the different tax charges and map out a financial plan that can help ease current pressures.

Need financial support? Get in touch with our expert team today