Dividend tax in 2026/27: the new rates, and five ways to pay less
If you pay yourself in dividends, April 2026 made you poorer: the basic rate rose to 10.75% and the higher rate to 35.75%. Here is how dividend tax now works, what a typical director pays, and the levers that still bring the bill down. Or go straight to the dividend tax calculator.
The 2026/27 rates
- First £500 of dividends: tax free
- Basic rate band: 10.75%
- Higher rate band: 35.75%
- Additional rate (income over £125,140): 39.35%
Dividends sit on top of your other income, so your salary decides which band they land in. A director on a £50,270 salary taking £20,000 in dividends pays £6,971 in dividend tax this year: the whole £19,500 taxable slice falls in the higher rate band.
Five levers that still work
- The salary and dividend mix. The optimum split moved when the rates did. If yours was set years ago, it is probably wrong now.
- Pension contributions. Company contributions escape Corporation Tax, employer NI and dividend tax entirely. Nothing else comes close.
- Spouse shareholdings. Two allowances, two basic rate bands. Properly structured share classes make income splitting legitimate and effective.
- ISAs. Dividends inside an ISA are not taxed at all. Long-term investors should fill the wrapper first.
- Timing. A dividend declared on 6 April instead of 5 April lands in a different tax year. Around band edges that single day is worth real money.
Check your own position
Two minutes with the calculator shows your bill and your effective rate. If the number annoys you, good: that is the start of tax planning, and the review is part of every package we offer. Get in touch.
To see dividends and salary together, our free director take-home calculator shows your full 2026/27 take-home, including the 60% trap warning.
