If you are a shareholder, from 6 April 2026, the tax you pay on dividends is increasing, as follows:
- Basic rate moves from 8.75% to 10.75%
- Higher rate moves from 33.75% to 35.75%
- Additional rate remains at 39.35%
For shareholders of owner-managed companies, dividends are still one of the most tax-efficient ways to take money out of the company. But with these increases coming in, it will be worth taking a fresh look at your extraction strategy.
Using 2025/26 allowances and rates
There are a few days left before the 2025/26 tax year ends.
Where the timing of dividends can be controlled, it may be beneficial to accelerate the payment of dividends before 6 April 2026. Please contact us to find out whether this would work for you.
Salary v dividends in 2026/27
While there are several options for drawing profits from a company in a tax-efficient way, it often comes down to a combination of salary and dividends.
For many individuals, taking a small salary equal to the £12,570 personal allowance and then taking dividends as the balance of the income required, can be a good approach.
This will continue to apply in 2026/27, even though the tax on dividends will be higher. However, the additional tax involved may mean you need to increase the amount of your dividends to retain the same amount of income.
There are situations where taking a higher salary could be advisable, including where the employment allowance is available to offset any employer’s national insurance arising on salaries.
Please do contact us for personalised advice on how to maximise income from your company.