Dividend Tax Rate Changes

🚨 Dividend Tax Rate Changes Coming in April 2026 🚨

If you're a director of a limited company, here's an important update that could affect how you pay yourself.

From 6 April 2026, dividend tax rates are set to increase. This means that taking income as dividends—often the most tax-efficient route for many directors—will become more costly.
The dividend tax rates will increase from April 6, 2026, with the basic rate rising from 8.75% to 10.75% and the higher rate increasing from 33.75% to 35.75%. The additional rate will remain unchanged at 39.35% during this period, as will the £500.00 dividend allowance.

Unpaid proposed dividends are generally not taxable until they are declared and become due and payable. If a dividend is proposed but not yet paid, it does not count as taxable income for the shareholder.

Key points:
1️⃣ Higher Dividend Tax Rates: Expect to pay more tax on dividends across all bands. Even basic rate taxpayers will see their take-home reduced.

2️⃣ Impact on Profit Extraction: If you rely on dividends rather than salary for most of your personal income, your overall tax bill will increase.

3️⃣ Planning is Key: Company directors may want to:

• Review their remuneration strategy.

• Consider bringing forward some dividends before April 2026.

• Explore a balance between salary and dividends to optimise tax efficiency.

4️⃣ Seek Professional Advice: A tailored approach from an accountant can help you minimise unnecessary tax burdens and make the most of allowances.

💡 Now is the perfect time to revisit your company's pay strategy and ensure you're prepared for the coming changes.