Dividend tax rates are set to increase from 6 April 2026. This means anyone receiving dividends from their company will soon face higher tax on that income. The basic rate will rise from 8.75% to 10.75%, and the higher rate from 33.75% to 35.75%, while the top rate will remain the same at 39.35%.
As the rates are increasing, some business owners are thinking about taking extra dividends before April 2026. Doing this means those dividends are taxed at the current, lower rates rather than the higher rates coming in next year. For some people, this could save a noticeable amount of tax if their company has spare profits available.
However, taking more dividends early doesn’t automatically mean you save money. Extra income could push someone into the next tax band, which might reduce or cancel out the benefit. It depends on each person’s full income for the year, not just their dividends. This is why it’s important to look at the whole financial picture before deciding.
Even with these points to consider, the 2025/26 tax year is still a chance for many business owners to benefit from the lower rates while they last. Anyone thinking about this should check whether taking extra dividends fits with their wider plans and financial situation.
Dale Southworth, Manager at Burgis & Bullock, said: “The rise in dividend tax rates will add extra cost for many business owners, particularly those who rely on dividends as a core part of their income. With this increase affecting company owners only – and no equivalent rise for sole traders – it’s likely to prompt more people to question whether operating through a limited company is still as attractive as it once was.
“Taking additional dividends before April 2026 can help reduce the impact, but it needs to be done carefully. A quick review of your overall income and personal tax position can make a significant difference to whether this strategy saves you money.”
He added, “This is a good time for people to review how they take money out of their business. Planning ahead now makes everything clearer and helps avoid surprises when the new rates take effect.”
Dale Southworth, Manager at Burgis & Bullock.
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