GEORGE Osborne’s Budget last week was full of surprises.

I want to highlight two areas where the changes will have a significant impact: taxation of dividends and taxation of landlords.

Until now dividends have carried a non-repayable 10% tax credit.

That will disappear from April 6, 2016.

Instead there will be a tax free dividend allowance of £5,000 for all taxpayers.

Dividends in excess of that will be taxed at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

These changes will impact not only on those with substantial stock market portfolios but also on people who operate their business through limited companies and who extract company profits by way of dividends rather than salary.

Three significant changes will affect people with income from property lettings.

The Rent-a-Room allowance (which covers rooms let and B&B provided in someone’s home) will increase from April 6, 2016, from £4,250 a year to £7,500 a year.

The 10% wear and tear allowance, claimed by many landlords, will be abolished from April 6, 2016, in favour of an allowance for replacement furnishings (though the exact details are yet to be announced).

The third – and most controversial – measure is the restriction of mortgage interest relief on let residential properties.

Currently interest is allowable in full for tax at all tax rates as long as the loan does not exceed the cost or market value of the property when first let.

From April 6, 2017, the relief will be reduced with 75% of the interest allowable at all rates and 25% allowable only at the basic rate.

From April 6, 2018, the amount allowable at all rates will fall to 50% and from April 6, 2019, it will fall to 25%.

From April 6, 2020, interest will only be allowable at 20%.

The impact of this last change on landlords who pay tax at higher or additional rate could be considerable and will hit even harder if and when interest rates rise.

Anyone who operates their business through a limited company and who takes part of the profit by way of dividends may well be affected by the change to the way dividends are taxed.

Landlords will also need to look at how the changes from April 2017 will affect them.

If you think these measures might affect you, I’d recommend an early chat with your tax adviser to discuss how the effects might be mitigated.

*Paul Aplin OBE is a tax partner with A C Mole & Sons and chairman of the Technical Committee of the Institute of Chartered Accountants in England & Wales Tax Faculty; you can follow him on Twitter @PaulAplinOnTax. He and fellow tax partner Amanda Gunter can be contacted on 01823-624450.