From 6 April 2026, the tax on dividends goes up by 2 percentage points for basic and higher rate taxpayers. If you run your own limited company and pay yourself mainly through dividends, this affects you directly.
Below we set out the new rates, what has not changed, and a worked example showing how much extra tax a typical company director could pay.
The new dividend tax rates
The basic and higher rates both rise by 2%. The additional rate stays where it is.
| Tax band | Taxable income | 2025/26 | 2026/27 | Change |
| Basic rate | Up to £37,700 | 8.75% | 10.75% | +2% |
| Higher rate | £37,701 to £125,140 | 33.75% | 35.75% | +2% |
| Additional rate | Over £125,140 | 39.35% | 39.35% | No change |
The figure of £125,140 marks two boundaries at once: it is where the higher rate band ends and the additional rate begins, and it is also the point at which the personal allowance taper (described below) reduces the personal allowance to nil.
In practical terms, a basic or higher rate taxpayer will pay an extra 2p in tax on every £1 of dividends they receive above the £500 allowance.
What stays the same
A few things are not changing.
- The £500 dividend allowance. The first £500 of dividends you receive in the tax year is still tax-free. However, those dividends still count towards your total income when working out which tax band applies to the rest of your dividends. The allowance removes the tax charge on that slice, but does not remove those dividends from the band calculation itself.
- Allowances and thresholds. The personal allowance and the income tax thresholds remain frozen.
- ISAs and pensions. Dividends from investments held inside an ISA or a pension are still not taxable, so the rate rise does not affect them.
A note on the personal allowance taper
Before we look at a worked example, there is an important point to be aware of if your total income goes above £100,000. Once income exceeds that level, your personal allowance starts to reduce by £1 for every £2 your income goes above £100,000. Once your total income reaches £125,140, the personal allowance is reduced to nil.
What it means in pounds
To show the effect, take a director who pays themselves a salary of £12,570 (the personal allowance) and takes the rest of their income as dividends. The table shows the dividend tax due in each band under the old and new rates.
| Dividends in each band | Dividends | Tax 2025/26 | Tax 2026/27 | Increase |
| Dividend allowance (tax-free) | £500 | £0.00 | £0.00 | £0.00 |
| Basic rate (taxable income up to £37,700) | £37,200 | £3,255.00 | £3,999.00 | £744.00 |
| Higher rate (total income to £100,000) | £49,730 | £16,783.88 | £17,778.48 | £994.60 |
| Total increase (income of £100,000) | £1,738.60 | |||
The table below shows the same director with total income of £125,140. At this level the personal allowance has been reduced to nil.
| Total income | Dividends | Tax 2025/26 | Tax 2026/27 | Increase |
| £125,140 (salary £12,570, dividends £112,570) | £112,570 | £31,666.13 | £33,907.53 | £2,241.40 |
Someone using the full basic rate band will pay £744 more a year. A director with total income of £100,000 will pay £1,738.60 more. At £125,140 the rate rise adds £2,241.40. Above that point the additional rate applies, which has not changed, so the extra cost stops there.
These figures are for illustration only and show dividend tax only, not income tax on the salary. The first table assumes the full personal allowance of £12,570 is available. The second reflects the personal allowance being reduced to nil at total income of £125,140.
What to do next
If you take dividends from your company, it is worth reviewing how you pay yourself for the rest of 2026/27 and for 2027/28. The right mix of salary, dividends and pension contributions is not the same for everyone. It depends on your total income, other sources of income, and your personal tax position. There is no single answer that suits all director-shareholders, so this is a conversation best had on the basis of your own numbers rather than a general rule.
If you would like us to look at your position, get in touch with the EOACC team.
A note for company directors on self-assessment
From the 2025/26 tax year, if you are within self-assessment and held a directorship in a close company at any point during the year, you must include additional information on the employment pages of your tax return. This applies even if the company was dormant, even if the directorship ended before the tax year closed, and even if you received no salary or other payment from the company.
The information you must provide is: confirmation that you held a directorship; the company name and its Companies House registered number; the amount of dividend income you received from that company during the year (stating nil if none was received); and your percentage shareholding in the company, measured by the nominal value of the shares you hold.
There is one exception: directors of registered charities or community interest companies who received no employment income, dividend income, or other distribution from that company or any connected company are not required to include this information.
A penalty of £60 applies if the required information is missing from your return. If this applies to you, it is worth checking your position before you file.
This article is for general information only and must not be relied on as tax or financial advice. Acting on any of the information is entirely at your own risk.