"From the start of the 2026/27 tax year, the basic dividend tax rate will rise from 8.75% to 10.75%, while the higher rate will increase from 33.75% to 35.75%. The change will hit particularly hard those who pay themselves via a combination of salary and dividends through their own limited companies."
"A typical company director taking around £50,000 annually in mixed income could face an extra £600 in tax each year, while someone earning £100,000 may see their tax bill rise by £1,400. Qdos warned that the adjustments could reduce disposable income for tens of thousands of small business owners and contractors."
"Tax experts advise company directors to review their salary and dividend mix before the new rates take effect and to consider strategies to minimise the impact, such as making tax-efficient pension contributions or spreading dividend payments over multiple tax years."
Starting the 2026/27 tax year, dividend taxation will increase significantly, affecting freelancers, contractors, and company directors who pay themselves through limited companies. A director earning £50,000 annually could face an additional £600 in tax, while those earning £100,000 may see increases of £1,400. The changes will reduce disposable income for tens of thousands of small business owners who rely on dividend payments for household budgets and business expenses. Tax experts recommend reviewing salary and dividend structures before the new rates take effect and considering strategies such as tax-efficient pension contributions or spreading dividend payments across multiple tax years to minimize impact.
#dividend-tax-increase #small-business-taxation #company-directors #tax-planning-strategies #2026-tax-changes
Read at London Business News | Londonlovesbusiness.com
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