Tax Planning
Planning for UK Profit: Capital Allowances & Dividend Rate Changes Coming April 2026
UK businesses and investors need to understand upcoming shifts in capital allowances and dividend taxation set for April 2026—important for budgeting, structuring, and cash flow management.
By NomadicTax Research Team • 5-8 min read • March 11, 2026
## What’s Changing in April 2026
Under Budget 2025, the UK government will introduce significant changes to:
- **Capital allowances**—new first-year allowance of **40%** for qualifying expenditure on or after 1 January 2026; main writing-down allowance rates drop to **14%** for Corporation Tax from 1 April 2026 (for Income Tax from 6 April).([gov.uk](https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar?utm_source=openai))
- **Dividend tax rates** will increase by **2 percentage points** as of 6 April 2026 for UK taxpayers.([gov.uk](https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar?utm_source=openai))
## Who is Affected Most?
- Companies investing heavily in plant, machinery, or qualifying assets—this impacts depreciation and cash flow. <br>
- Shareholders relying on dividend income—higher rates reduce net income post-tax. <br>
- Small business owners using mixed income streams (salary + dividends). <br>
- Investors in UK property and capital intensive sectors. <br>
## Strategic Tax Planning Moves
Here are steps to adapt proactively:
1. **Time your capital spendings**. If possible defer non-urgent Capital expenditure until after 1 Jan 2026 to get the 40% first-year allowance. <br>
2. **Accelerate asset purchases**. If investments will be made before the rate drop, bring them forward.<br>
3. **Dividend planning**: consider paying dividends before April if cash flow allows and especially if already in lower tax bracket.<br>
4. **Review entity form**: Partnerships vs Ltd Companies vs Trusts have different implications under dividend and corporate tax changes.<br>
## Practical Example
Say “GreenTech UK Ltd” plans to purchase £1 million of qualifying plant equipment in early 2026:<br>
- Purchases **after** 1 Jan 2026: eligible for 40% first-year allowance. <br>
- If instead purchase on 1 April 2026 or later: only 14% writing-down allowance. <br>
If a shareholder earns £50,000/year and takes £10,000 in dividends:<br>
- Current rate: say 8.75% on first £2,000 + basic/savings rate (for example). <br>
- With 2pp increase, effective tax paid rises proportionally. Need to recalculate net benefit.<br>
## Actionable Advice
- **Engage your accountant now** to forecast the impact. <br>
- Use **cash flow modelling** to assess benefit of accelerating capital spends or pushing dividends. <br>
- Ensure depreciation schedules are updated and aligned with new allowances from April.<br>
- Consider grouping or splitting income to minimize the higher tax hit on dividends.<br>
**Bottom line**: UK businesses and individuals should prepare now for April 2026 to leverage capital allowances and mitigate increased dividend taxes.