Growing numbers could be forced to file a self-assessment tax return every year to pay tax on dividends they have generated from shares they hold. For many it will come as a total shock.

Others may not realise they have have to declare the income and submit a return to HM Revenue & Customs. They could even face fines and penalties for failing to do so.

As Conservative chancellor, Hunt halved the tax-free dividend allowance from £2,000 to £1,000 from April 2023. Then he halved it again to just £500 from this April.

Any dividend income from shares above these thresholds will be taxed at one of three different rates, once someone exceeds their £12,570 personal allowance.

Basic rate taxpayers will pay 8.75% tax on dividend income above £500 a year. This tax charge rises to 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers.

The number paying dividend tax has almost doubled to 3.6 million in just three years, thanks to Hunt.

Of these, around 1.7million will be 20% basic rate taxpayers. They will pay £385 on average. Some will get pulled into the tax net despite earning just a few pounds above the £500 dividend tax allowance.

One in five higher-rate taxpayers will now pay dividend tax. They will hand over £5,379 each on average, while additional rate taxpayers with dividend income will typically pay £32,578.

The dividend tax bill will total £18billion this financial year alone, according to a Freedom of Information request from investment platform AJ Bell.

AJ Bell’s director of personal finance Laura Suter said many basic-rate taxpayers may only be a fraction over the annual dividend allowance but have to declare the income anyway. “They may not have a huge bill to pay but will still be required to file a tax return.”

Dividends are regular payments that companies make to shareholders as a reward for holding their shares. Investment funds pass on all the dividends they receive to customers.

Dividends are paid gross, with no tax deducted.

The self-employed who pay themselves income via their own company also have to pay dividend tax.

Many investors with smaller share holdings never have gave dividend tax a thought when the annual allowance was £2,000 a year, Suter said.

It’s a different story given today’s shrunken allowance. “If your investment portfolio is yielding 5%, you only need to have £10,000 to hit the tax-free limit.”

Suter added: “What’s particularly frustrating is that some will have only just breached the allowance, meaning they now have to file a tax return for a piddling amount of tax.”

If your dividend income is less than £500 a year, then you don’t need to declare it to HMRC. However, those earning more dividend income must declare it.

It could be complicated checking whether you owe the tax, and working out what you have to pay HMRC.