What Do the 2026/27 Dividend Tax Changes Cost You?
From 6 April 2026, dividend tax rates increased by 2% for basic and higher rate taxpayers. The basic rate moved from 8.75% to 10.75%, and the higher rate from 33.75% to 35.75%. The additional rate (39.35%) is unchanged. For a company director taking £30,000 in dividends, that is hundreds of pounds more per year. This tool shows you the exact impact at your income level.
How to use
Set your annual dividend income and your other income (salary, pension, etc.) using the sliders. The tool calculates your dividend tax under both the old 2025/26 rates and the new 2026/27 rates, showing the breakdown by tax band and the total annual difference.
Frequently Asked Questions
Why have dividend tax rates increased?
The government announced a 2% increase to basic and higher rate dividend tax in the Autumn Budget 2025, effective from April 2026. This raises the basic rate from 8.75% to 10.75% and the higher rate from 33.75% to 35.75%. The additional rate remains at 39.35%. The measure is expected to raise approximately £1 billion per year.
Does the dividend allowance change for 2026/27?
No. The dividend allowance remains at £500 for 2026/27. The first £500 of dividend income is tax-free regardless of your tax band. This was reduced from £1,000 in 2024/25 and £2,000 in 2023/24.
How can I reduce my dividend tax bill?
Consider using your ISA allowance (£20,000 per year) where dividends are completely tax-free. Pension contributions reduce your taxable income and may move dividends into a lower band. Splitting shareholdings with a spouse can utilise two dividend allowances and two sets of tax bands.
Are dividends from ISAs affected?
No. Dividends received within an ISA wrapper are completely tax-free and not affected by the rate changes. This makes ISAs even more valuable for dividend investors from April 2026.
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Book a Free Discovery Call© Imperial Consulting Limited, trading as Grosvenor.Solutions. This tool is for illustrative and educational purposes only. It is not tax advice. Your circumstances may differ. Always consult a qualified professional before making tax decisions. Calculated using 2026/27 HMRC published rates for England, Wales and Northern Ireland.