Dividend Tax 2026 – How Directors Can Pay Less Tax

If you run a limited company, your income strategy needs a review.

Dividend tax has increased, and the allowance remains low. Many directors now pay more tax than necessary.

This guide explains what changed and how to reduce your tax.

What changed in 2026

Dividend tax rates:

• 10.75% basic rate
• 35.75% higher rate
• 39.35% additional rate

Dividend allowance remains £500.

Why this matters

Most directors take income as:

• Salary
• Dividends

Higher dividend tax reduces your take-home income.

Example

Dividend income: £40,000
Allowance: £500

Taxable: £39,500

This creates a higher tax bill without planning.

What you should do now

1. Review salary and dividend mix

Adjust based on new tax rates.

2. Use pension contributions

• Reduce corporation tax
• Avoid dividend tax

3. Monitor tax bands

Avoid unnecessary higher rate tax.

4. Use spouse allowances

Split income efficiently.

5. Review director’s loan account

Avoid additional tax charges.

Common mistakes

• Using old strategies
• Ignoring tax thresholds
• No pension planning
• Taking dividends without review

How we help

We help directors:

• Plan tax-efficient income
• Reduce personal tax
• Structure dividends properly
• Stay compliant

Take action

Dividend tax has changed. Your strategy should change.

A review can increase your take-home income.