Dividend tax is rising. Are you ready?
For many owner-managed businesses, dividends have long been a popular and tax-efficient way to take money out of the company once corporation tax has been paid. That position is changing.
From 6 April 2026, the tax you personally pay on dividends will increase:
- Basic rate dividend tax rises to 10.75%
- Higher rate dividend tax rises to 35.75%
- The additional rate remains 39.35%
These increases come at a time when income tax thresholds remain frozen, meaning more people are being pushed into higher tax bands through fiscal drag. For directors who rely heavily on dividends, the combined effect can be significant.
A strategy rethink may be required
Dividends have traditionally offered flexibility and simplicity. However, as dividend tax rates rise, the gap between different ways of extracting profits narrows. This means:
- A dividend heavy strategy could cost more than expected, particularly for higher rate taxpayers
- Approaches that worked well in previous years may no longer be optimal from April 2026
- Personal tax bills may rise even where overall income has not materially changed
The dividend tax increase is not a reason to abandon dividends entirely, but it is a clear signal to review how profits are being taken from the business.
We’re here to help
If you’re concerned about how the April 2026 dividend tax changes could affect you, Azets’ tax specialists can help you review how you pay yourself and identify practical ways to improve tax efficiency while staying compliant. Our advisers at Azets Wealth Management can also support you with longer‑term financial planning. Get in touch via the form below to discuss next steps.
