From the new tax year in April 2026, the base and higher rates of tax on dividend income will increase by 2% to 10.75% for basic-rate taxpayers and 35.75% for higher and additional rate taxpayers.

The current £500 of exempted tax free dividend income will not change, although this has been reduced by successive chancellors and is now very limited.

This move is expected to raise £280m in tax in year one, rising to £985m in 2027-28, with the longer term revenue tax predicted at least £1.16bn a year from 2028 onwards.

Nigel Green, CEO of deVere Group said: ‘For decades the London market has attracted income-orientated investors precisely because of its broad catalogue of dividend-paying, blue-chip companies. Many households rely on that income - often outside ISAs or SIPPs.