Changes to dividend allowances have been frustrating for investors, with the tax-free income dropping to £500 for the 2024/25 tax year. Earnings above this threshold are taxed at 8.75% for basic rate taxpayers, 33.75% for higher earners, and 39.35% for additional rate taxpayers. The number of investors paying dividend tax increased to 3.7 million for the 2024/25 tax year. To overcome dividend tax, investors can utilize a stocks and shares ISA for tax-free investments. Alternatively, investors can consider growth stocks for higher returns, though the associated risks are greater. Adapt your strategy based on your risk appetite and financial goals.

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