Dividend tax credits will be replaced by a £5,000 tax-free allowance in proposals announced by Chancellor George Osborne in the Summer Budget.
Osborne described the current dividend tax system as “complex and archaic.”
The rates of dividend tax will be set at 7.5 per cent, 32.5 per cent and 38.1 per cent.
Those earning over £140,000 will pay more, while 85 per cent of taxpayers will see no change or be better off, while over one million people will be better off, Osborne claims.
Dividends from pensions and Isas will remain tax-free.