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It was announced in the Summer 2015 Budget that there would be a £5,000 tax free dividend allowance from 6 April 2016 and that 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.