This proposal was already announced and has been the subject of previous blogs.

From 6 April 2016 the tax on dividends will change. There will be  £5,000 tax free dividend allowance and once used the rate of tax on dividend income would increase by 7.5%.

This means that basic rate taxpayers will pay 7.5% tax on dividend income, higher rate taxpayers 32.5% and additional rate taxpayers 38.1%.

Note that from 6 April 2016 dividends will no longer carry with them a 10% notional credit.  This is the reason why dividends received by basic rate taxpayers were effectively tax free up to 5 April 2016.

Andy Scott