I found this article useful:

https://www.litrg.org.uk...y%205%20October%202025.

In summary, anyone receiving dividend income above the £500 allowance in an unsheltered account, but who does not meet the threshold for SA, needs to report actual dividend income directly to HMRC by 5th October after the end of the tax year. Also note that they will assume the same level of income in future years, so it needs to be done the following year, even if you receive less than £500.

The article makes the point that more people are likely to need to address this, due to the drastically reduced allowance, and previous changes to how dividends are treated, though most people will hopefully be invested in sheltered accounts only. I may be quite unusual in being affected by this, and will only owe about £20, and it seems like a complicated system to collect quite small amounts of tax.

I expect many people in this situation might not be aware of it, so won't necessarily be put off. Also dividend tax isn't as high as income tax or CGT*, so some might actually want to increase their income from dividend paying companies.

* Just to note that tax has been paid by the company as corporation tax.

I think there are bigger factors putting people off investing more in equities currently, not least the potential impact of government policies on corporate earnings, and, in the UK, a general anti-investing culture - it still seems to be very much a minority activity, based on people I speak to. Plus most people will be covered by the allowances for pensions and ISAs.

As regards bonds, the tax treatment of Gilts is relatively supportive IMO, but I agree that the complexity might put people off, as you suggest, rather than the amount of tax payable.