Tax Planning
How CEOs and Founders Can Navigate the New Dividend Tax Rates in the UK
An actionable guide for business leaders to plan for higher dividend tax rates effective from April 2026 and align distributions with personal tax bands.
By NomadicTax Research Team • 5-8 min read • June 7, 2026
## Understanding the Changes Since April 6, 2026
The UK has updated its tax regime regarding **dividend income**, as outlined in the *Income Tax: Changes to Tax Rates for Property, Savings and Dividend Income* policy. From **6 April 2026**, dividend rates have changed: the ordinary (basic) rate on dividends is now **10.75%**, the higher rate is **35.75%**, and the additional rate is **39.35%**. ([gov.uk](https://www.gov.uk/government/publications/income-tax-changes-to-tax-rates-for-property-savings-and-dividend-income?utm_source=openai))
Savings and property income rate changes are also on the horizon: savings rates will increase from **6 April 2027**, and property income will get separate treatment in **the same tax year**. ([gov.uk](https://www.gov.uk/government/publications/income-tax-changes-to-tax-rates-for-property-savings-and-dividend-income?utm_source=openai))
## Practical Implications for Business Owners and Investors
These changes affect founders, shareholders, and small business owners who pay themselves via dividends. If your business uses dividend distributions as compensation, here's what might change:
- **Greater tax liability** when extracting profits as dividends, especially for those in the higher or additional rate bands.
- The dividend allowance (the tax-free band for dividends) remains in place, so smaller or occasional dividends may still be taxed favorably. ([gov.uk](https://www.gov.uk/tax-on-dividends?utm_source=openai))
- Property income and savings income will be taxed differently starting **April 2027**, which may affect investment property owners. ([gov.uk](https://www.gov.uk/government/publications/income-tax-changes-to-tax-rates-for-property-savings-and-dividend-income?utm_source=openai))
## Tax Planning Strategies
| Strategy | What to Do | Why It Helps |
|---|---|---|
| **Timely Distributions** | Consider issuing dividends **before 6 April 2026**, if feasible and consistent with business cash flow and legal limits. | Takes advantage of lower pre-change rates. |
| **Balancing Salary vs Dividends** | Increase salary (which is taxed under PAYE) to absorb higher-rate exposure. | Helps redistribute income across different personal tax bands. |
| **Holding Companies and Family Splitting** | Use family partnerships or holding companies to distribute dividends among lower-rate taxpayers. | Minimises higher-rate exposure. |
| **Utilising ISA or Pension Wrapper** | When possible, hold shares in **Stocks & Shares ISAs** or structure for pensions. | Dividends from ISAs are tax-free. Pension contributions get relief. |
## Monitoring Safeguards and Legislative Risks
- The Finance Bill 2025-2026 legislates these changes. ([gov.uk](https://www.gov.uk/government/publications/income-tax-changes-to-tax-rates-for-property-savings-and-dividend-income?utm_source=openai))
- The Order and Tax Information & Impact Notes provide detailed examples. ([gov.uk](https://www.gov.uk/government/publications/changes-to-tax-rates-for-property-savings-and-dividend-income/change-to-tax-rates-for-property-savings-and-dividend-income-technical-note?utm_source=openai))
- Any exemption (like ISAs) or relief should remain in place, but always confirm eligibility per your situation.
## Example Case
Imagine **Sarah**, a founder who normally takes £50,000 salary plus £40,000 in dividends annually. Under old rules she was taxed at 8.75% on the dividends. Now, after April 6, 2026, that amount is taxed at **10.75%**, costing an extra **£800/year** in tax. She could:
- Move some dividend payment into salary before the change,
- Or defer bonus/dividend payments until after April if she is in a lower rate band by then.
## Actionable Checklist
- [ ] Review your projected income bands for the next tax year.
- [ ] Discuss alternative compensation structures with your accountant.
- [ ] If planning dividends, consider legal and financial capacity.
- [ ] Ensure any ISAs or pension investments are maximised.
- [ ] Keep updated: property income and savings income changes coming April 2027.
## Final Thoughts
The 2026 dividend tax rate increase means you will need to be more tactical about when and how you extract profits from your business. With smart planning—using salary, ISAs, timing—you can mitigate the additional tax burden. What’s key is working with an advisor to align distributions with your personal tax thresholds and long-term goals.