According to analysis from the Sunday Times newspaper, the Osborne family's wallpaper business, Osborne & Little Group Ltd, paid out dividends totalling US$485,000 (£335,000) to stakeholders in 2014, despite not paying UK corporation tax since 2008.
The chancellor was among those stakeholders, receiving a payout of US$1,780 (£1,230), while Osborne's parents, Sir Peter and Lady Felicity Osborne, reportedly received dividend payouts of more than US$390,000 (£270,000).
According to the analysis, the company has avoided paying corporation tax by rolling over losses from previous years and deferring tax payments.
The company, founded by Osborne's father, Sir Peter, and his brother-in-law, reportedly paid US$8,700 (£6,000) in overseas taxes and had a deferred "tax charge" of US$250,000 (£173,000) over the last seven years.
Another Blow for Tories' Tax Credibility
The news comes as a hugely embarrassing revelation for the chancellor, who himself launched a crackdown in 2012 into what he labeled "morally repugnant" tax avoidance.
It also comes amid increased pressure to get tough on tax evasion in the UK, amid the perception that many large companies are taking advantage of the many loopholes in the British system.
Critics savaged the government's recently announced 'sweetheart' tax deal with Google, which saw the Internet giant agree to pay back US$190 million (£130 million) in unpaid taxes over the past decade.
Despite Osborne initially labeling the deal a "major success" critics pointed out that Google was only paying the equivalent of 3 percent tax on its earnings, which was then contrasted to a similar deal in Italy, which saw Google pay back tax to Italian authorities at a rate of roughly 15 percent.
Urged ECOFIN to implement country by country reporting of tax by multinationals + said EU should go further and make the reporting public— George Osborne (@George_Osborne) February 12, 2016
It also comes amid revelations that some of the world's largest investment banks paid no corporation tax in the UK in 2014, despite making billions in profits.
The findings are sure to raise more skepticism of the UK government's commitment to significant tax reform amid criticism the Conservative Party are soft on tax dodgers.
The opposition Labour party has turned up the heat on the government over the matter, with shadow chancellor John McDonnell publishing his tax returns and challenging Mr Osborne to do the same.
In reaction to the revelations, a spokesman for Mr Osborne said: "All of the Chancellor's interests are declared properly and in accordance with the rules."