What’s Changing on 6 April 2026
- Dividend tax rates rise: Basic rate becomes 10.75%, higher rate 35.75%, additional rate stays at 39.35%. (gov.uk)
- Personal Allowance remains £12,570, unchanged through to April 2028. (salarytax.uk)
- Other core thresholds (basic, higher rate bands for non-savings/dividend income) also remain frozen. (salarytools.co.uk)
Who Will Be Most Affected
| Taxpayer Type | Likely Impact |
|---|---|
| Shareholders using dividend income as primary income | More of their passive income taxed at a higher rate; consider timing or dividend planning. |
| Investors in close companies taking loan-to-participator distributions | These now follow the higher dividend upper rate (35.75%) for relevant amounts. (gov.uk) |
| Pensioners or higher earners with significant investment income | Could trigger higher tax bills; tax-efficient wrappers will be more attractive. |
Tax Planning Moves to Consider
- Use individual savings allowances—within ISAs all dividend income is still tax-free. Over £500 dividends outside ISAs are taxed at the new rates. (gov.uk)
- If possible, manage your total income so that more of your dividends fall into a lower marginal tax band.
- Favor capital growth strategies over high dividend yield if you're tax-sensitive.
- Review use of close company structures and participator loans—they are taxed in line with the new dividend rates. (gov.uk)
Example
Sarah earns £45,000 salary and receives £5,000 in dividends in the 2026/27 year.
- Her first £12,570 is tax-free (Personal Allowance).
- Salary (£45,000) less allowance taxed at 20% up to £50,270.
- Dividends over the £500 allowance (~£4,500) taxed at 10.75% since she remains in the basic rate band. That means ~£484 in tax due on her dividend income.
Actionable Insights
- Hold new shares or shift investments into ISAs or other tax-advantaged accounts.
- Time dividend payments—if close to year-end, perhaps defer until after 6 April 2027 if you expect rate changes (or other changes impacting your marginal rate).
- Monitor income mix—employment, trading, or passive—to see which tax band you fall into.
- Speak to a tax advisor if you are a director benefiting from close company distributions or complex dividend arrangements.