29/01/2026
📢 Dividend Tax Rates Are Rising in April 2026 – What Does This Mean for You?
The latest Budget confirmed a 2% increase to the ordinary and upper dividend tax rates from April 2026. For many owner-managed businesses, dividends play a key role in how directors extract profit — so this change may impact how you pay yourself from 2026/27 onwards.
🔍 What’s Changing? (From April 2026)
• Ordinary dividend tax rate: 8.75% ➜ 10.75%
• Upper dividend tax rate: 33.75% ➜ 35.75%
• Additional dividend rate remains 39.35%
• Tax-free dividend allowance stays at £500
These changes apply only to dividends, and the rate you pay will still depend on your total income.
💼 What This Means for Profit Extraction
Dividends have long been a tax-efficient way for director-shareholders to take income — but with rates rising, the balance between salary and dividends may need a rethink. The most efficient strategy will vary based on your income, pension contributions, other earnings and company profits.
You may want to consider:
✔ Whether a new salary/dividend mix could reduce your tax bill
✔ Bringing forward dividends before April 2026 (where suitable)
✔ How taking a higher salary might affect cash flow
If you’d like to review your remuneration strategy or understand how these changes could affect your take-home pay, get in touch with the Crouchers team. We’re here to help you stay tax-efficient and plan ahead with confidence. 💬
www.crouchers.co.uk