As announced at the 2025 Autumn Budget, the ordinary and upper dividend tax rates increased by two percentage points from 6 April 2026. The additional rate remains unchanged.
The New Rates
| Band | 2025/26 Rate | 2026/27 Rate |
|---|---|---|
| Dividend ordinary (basic rate band) | 8.75% | 10.75% |
| Dividend upper (higher rate band) | 33.75% | 35.75% |
| Dividend additional | 39.35% | 39.35% |
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The dividend allowance remains at £500 for 2026/27. This acts as a nil rate band — dividends sheltered by it are tax-free, but the allowance still uses up part of the relevant tax band.
Impact on Profit Extraction
For directors of personal and family companies taking a salary equal to the personal allowance (£12,570) and extracting further profits as dividends, the rise means an extra £20 in tax for every £1,000 of dividend income taxed at the ordinary or upper rates.
A director extracting £80,000 in dividends in 2026/27 will pay approximately £1,590 more in tax compared to 2025/26.
This article is for general information only and does not constitute tax advice. Your specific position will depend on your individual circumstances. Contact our team for tailored guidance.
