About 90,000 investors are set to lose out as a result of Hammond's changes to the dividend tax allowance outlined in the Budget, many of whom are pensioners, according to data from The Share Centre.
The retail stockbroker said the changes will typically affect investors with portfolios valued at more than £50,000 (assuming a 4% yield, a portfolio size of £50,000 would generate dividend income of £2,000).
It added an "unintended consequence" of the change could be that it penalises those using dividends to fund their retirement.
In the 2017 spring Budget, Chancellor Philip Hammond cut the dividend tax allowance from £5,000 to £2,000 with the reduction set to take effect from April 2018.
The government said the move - alongside the now scrapped proposals to increase Class 4 National Insurance - would reduce the tax differential between the employed and the self-employed and raise revenue for the government to invest in public services.
The Share Centre director of customer experience Darren Cornish said: "A significant number of our customers have portfolios over £50,000 that are not being held within a tax efficient wrapper such as an ISA. These are not company directors paying themselves through dividends - many are pensioners who turned to investing because interest rates were so low."
He added: "They could see their tax liability increase by hundreds or possibly thousands when the allowance is reduced next year. Taken across the industry as a whole, we estimate there are around 90,000 investors in this position."
Shield impact on investment
The Share Centre said investors can shield themselves from the impact of the reduced dividend allowance by transferring their investments from a share account to a tax-efficient wrapper such as an ISA.
Currently, £15,240 can be held within an ISA per tax year, but this is set to rise to £20,000 from 6 April 2017, and will be shielded from capital gains tax and income tax on profits.
Cornish said: "One thing customers may wish to consider is selling their investments and repurchasing them within as ISA, sometimes known as ‘Bed and ISA'."
Chase de Vere certified financial planner Patrick Connolly agreed that although the reduction would hit plenty of investors, there were ways around it.
"There will be lots of investors who will be affected by this," he said, "in terms of the way to get around it, the most obvious way is to put money into tax efficient wrappers, with ISAs you've got a rising allowance, so for a couple that's £40,000 they can shelter in a tax efficient wrapper."
He added: "There are other steps that could be potentially taken as well, such as re-arranging the types of assets held, see whether you're holding assets that produce interest and could benefit from the personal savings allowance, or assets that are producing dividends, in which reliance must be placed on the dividend allowance. You could also look into whose name the investment is in, for instance, perhaps you're using your dividend allowance but your spouse isn't."
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