Dividend tax is rising in April 2026 — what limited company directors need to do now

If you run your own limited company and pay yourself through dividends, April 2026 brings a change you need to know about. The dividend tax rates are going up, and while the increase might sound small on paper, the impact on your take-home pay can be surprisingly significant depending on how much you draw.

We've been talking to a number of our clients about this over the past few weeks, and the same questions keep coming up. So here's a plain-English explanation of what's changing, what it means in practice, and what you can do about it before the new tax year starts.

What's actually changing?

From 6 April 2026, dividend tax rates increase across all bands. The basic rate rises from 8.75% to 10.75%, and the higher rate rises from 33.75% to 35.75%. The additional rate (for those earning over £125,140) also increases from 39.35% to 39.35% — that one stays the same, as it happens.

The dividend allowance — the amount you can receive in dividends before paying any tax — remains at £500. So if you're drawing anything meaningful from your company beyond your salary, the extra tax will apply to most of it.

What does that look like in practice?

Let's say you draw £40,000 in dividends in the 2026/27 tax year and you're a basic rate taxpayer. After the £500 allowance, you're paying 10.75% on £39,500. That's £4,246.25 in dividend tax. Under the old 8.75% rate, it would have been £3,456.25. That's nearly £800 more per year — just from this one change.

For higher rate taxpayers drawing larger dividends, the numbers are bigger. It's worth doing the sums for your own situation rather than assuming it won't affect you much.

Should you pay yourself more dividends before April?

This is the question we're being asked most often right now, and the answer is: possibly, but it depends on your situation. If your company has sufficient retained profits and you have spare basic rate band available before 5 April 2026, bringing forward some dividend income into this tax year could save you a meaningful amount. But it's not a blanket recommendation — you need to make sure you're not inadvertently pushing yourself into a higher rate band, and you need to check that your company's accounts support the distribution.

This is exactly the kind of conversation worth having with your accountant before the end of March. If you're a Barton client, we'll be in touch if we haven't already been. If you're not, and this is prompting you to think about whether your current accountant is on top of things like this — that's probably a useful signal.

What else is worth reviewing before April?

The dividend rate rise doesn't sit in isolation. Employer National Insurance is also increasing from April, and the Employment Allowance is going up to £10,500. If you have employees — even just yourself on a small salary — there are planning points around payroll as well. And pension contributions before the end of the tax year remain one of the most effective ways to reduce both personal and corporate tax, so if you haven't maxed out what's sensible there, it's worth looking at.

None of this needs to be complicated. But it does need to be done before 5 April, not after. If you'd like to talk through your own position, get in touch with us at Barton Accountancy. We're based in Ashby-de-la-Zouch and Swadlincote, and we work with limited company directors across the East Midlands and beyond. A short conversation now can genuinely make a difference to what ends up in your pocket.