MoneySavingExpert.com homepage
Cutting your costs, fighting your corner
Founder, Martin Lewis · Editor-in-Chief, Marcus Herbert
Search bar closed.
MSE News

Budget 2017: Tax-free dividend allowance to be slashed

money
Sam Dunn
Sam Dunn
Editor
8 March 2017

The tax-free dividend allowance is to be slashed from £5,000 to £2,000 from April 2018, the Chancellor has said.

Since its introduction in April 2016, the allowance – which means no tax to pay on dividend payments – has helped small business owners who pay themselves an income this way from their firm, as well as largely benefiting better-off investors with shares portfolios.

Now, following what Philip Hammond called "unfairness" around the tax advantage – concern that many people were using it to pay less income tax, as well as it being a benefit to the already well-off – the lower rate is to be introduced.

However, dividend income received on shares held in a stocks and shares ISA will still be tax-free.

img-blog-circle-budget-2017

Budget 2017: Other key stories

What are dividends?

Dividends are a bit like interest on a savings account. If a company makes a profit, it gives some of it back to you – it could be on a regular basis or as a one-off. And just as you have a personal savings allowance for interest on savings, you also have a dividends allowance each tax year – currently £5,000 – where dividend income you receive is tax-free.

Any dividends received above this allowance will be taxed – at 7.5% for basic-rate taxpayers, 32.5% for higher-rate taxpayers and 38.1% for additional-rate taxpayers.

MSE Forum

Budget 2017: Tax-free dividend allowance to be slashed

Forum image
MSE Email icon 11 February 2025

For all the latest deals, guides and loopholes simply sign up today - it’s spam free!

Compare+ Home Insurance tool
Beat 19% price hikes
Stop overpaying on energy
Beat 6% April rise
Cheap medical insurance
Our five must-knows
30+ AI tools
Save time & hassle
Beat Microsoft price hike
Of up to £30 a year
Top 5% savings
Post base-rate cut
When'll mortgages fall?
See lender-by-lender
Tools and calculators

Clever ways to calculate your finances

Find your odds of getting top cards
Find your odds for getting a cheap loan
Compare broadband, phone & TV deals
Compares thousands of mortgages
Eight calcs to help you work out the cost
We ensure you’re on the cheapest tariff