The 2026/27 Dividend Tax Rise: How much more will you pay?
A deep dive into the upcoming 2% increase and how to restructure your extractions to minimize impact.
Read our guide on the 2026 Dividend Tax hike →
Updated for 2025/26 & 2026/27 Tax Years
Rates & Logic verified as of May 2026 following the 2026 Finance Act.
Director Salary & Dividend Calculator 2025-2027
Navigate the Company Director Dividend Tax Rate changes and discover the Optimal Salary Dividend Split 2026 to extract profit from your Limited Company.
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UK Dividend Tax Rates 2026/27: The 2% Hike Explained
The UK government is raising the Director Dividend Tax Rates 2026/27 by 2% starting April 2026 for Basic and Higher rate taxpayers. Here’s how it compares:
| Tax Band | 2025/26 Rate | 2026/27 Rate | Change |
|---|---|---|---|
| Basic Rate | 8.75% | 10.75% | ↑ +2.00% |
| Higher Rate | 33.75% | 35.75% | ↑ +2.00% |
| Additional Rate | 39.35% | 39.35% | No Change |
Source: GOV.UK - Official Dividend Rates
Director Tax Planning: Avoiding the 60% Marginal Rate and Personal Allowance Taper
We handle the complex tax logic so you don't have to.
60% Tax Trap Calculator
We automatically detect if your income hits the £100k–£125k Director Personal Allowance Taper and show you how to avoid the hidden 60% marginal tax rate. Official GOV.UK Guidance
Director Employer Pension Tax Deductions
See exactly how much Corporation Tax you save by redirecting profit into a highly tax-efficient Employer Pension contribution. Employer Contribution Rules
HMRC Marginal Relief 26.5%
Accurate calculations for companies with profits between £50,000 and £250,000 to determine your exact marginal Corporation Tax rate. Official HMRC Guidance
Knowledge Hub
Featured guides and essential reading for UK Limited Company Directors.
Tax Update
Strategy
Salary vs. Dividends: LEL vs Secondary Threshold 2026
Understanding the Lower Earnings Limit and why taking a £12,570 salary is still the best foundation for directors to optimize their extraction strategy.
Read our guide on the LEL vs Secondary Threshold →
Wealth
How to use Pensions to buy back your Personal Allowance
Hitting the £100k threshold? Discover how employer pension contributions can restore your tax-free allowance.
Read our guide on Pension Optimization →Frequently Asked Questions
Everything you need to know about Director Dividend Tax in 2025, 2026, and beyond.
How are director dividends taxed in the UK?
Director dividends are taxed at different rates depending on your total annual income. You first get a £500 tax-free dividend allowance (for both 2025/26 and 2026/27).
Beyond this, dividends are taxed based on your income band:
- Basic Rate: 8.75% (rising to 10.75% in 2026)
- Higher Rate: 33.75% (rising to 35.75% in 2026)
- Additional Rate: 39.35%
What are the dividend tax rates for 2026/27?
From April 2026, the dividend tax rates will increase by 2% for Basic and Higher rate taxpayers. The Basic rate will rise from 8.75% to 10.75%, and the Higher rate will rise from 33.75% to 35.75%. The Additional rate remains unchanged at 39.35%.
Do I pay company director dividend tax or does the company?
Dividend tax is a personal tax liability paid by the individual director through their annual Self Assessment. However, it is important to remember that dividends are paid out of "post-tax" profits. This means the company has already paid Corporation Tax (at 19% to 25%) on those earnings before they are distributed to you.
How can a director salary and dividend calculator help me?
A calculator helps you find the most tax-efficient "sweet spot" for profit extraction. It balances taking a small salary (to utilize your Personal Allowance and earn NI credits) against taking the remainder as dividends. Our tool specifically helps you avoid the 60% marginal tax trap and the tapering of your Personal Allowance if your income exceeds £100,000.
What is the current directors dividend allowance?
For the 2025/26 and 2026/27 tax years, the dividend allowance is £500. You can receive up to £500 in dividends before you start paying any dividend tax, regardless of your other income sources. This is in addition to your standard Personal Allowance (£12,570).
Why is the company director dividend tax rate increasing?
The 2% increase was announced by the government to raise additional revenue while maintaining an incentive for entrepreneurship. By using our optimizer, you can see the impact of these changes early and restructure your extraction strategy to minimize the tax leakage.