The latest Budget has confirmed what many business owners suspected: dividend tax rates are going up from April 2026. Both the ordinary and upper dividend rates will increase by 2%, making dividends a little less tax-friendly than they’ve been in recent years.

For owner-managed businesses, dividends are often a core part of how profits are taken out of the company. With higher rates on the horizon, the 2026/27 tax year might be a good moment to pause, review, and make sure your current approach still makes sense.

The new dividend tax rates (from April 2026)

Here’s what’s changing:

• The ordinary dividend rate increases from 8.75% to 10.75%

• The upper dividend rate rises from 33.75% to 35.75%

• The additional dividend rate stays put at 39.35%

• The tax-free dividend allowance remains at £500

As always, the rate you pay depends on your overall income and other sources of earnings. These rates apply only to dividends — salary, bonuses and savings income all live in their own tax lanes.

What this means in practice

Dividends have long been attractive because they’re taxed more gently than salary, which is why many directors opt for a modest salary topped up with dividends.

With dividend tax increasing, that balance shifts slightly — not dramatically, but enough to make a review worthwhile. What’s “most efficient” will differ from person to person and will depend on things like total income, other earnings, pension contributions and how profitable the company is.

It may be worth taking another look at:

• Your current mix of salary and dividends

• Whether taking dividends before April 2026 could be sensible

• The cashflow impact of changing how you extract profits

No one-size-fits-all answer here, unfortunately. (If there were, accountants would have a much quieter life.)

Seasonal staff and minimum wage rules (the bit HMRC cares about a lot)

If you employ staff — including temporary or seasonal workers — minimum wage rules still apply in full. Every hour worked must be paid at least the National Minimum or Living Wage.

That includes:

• Opening and closing duties

• Mandatory training

• Travel between work locations

Deductions for things like uniforms or equipment must not push pay below the legal minimum.

Current minimum wage rates

• £12.21 – Age 21+ (National Living Wage)

• £10.00 – Age 18–20

• £7.55 – Under 18

• £7.55 – Apprentices (under 19, or 19+ in their first year)

HMRC enforcement in this area is active, with penalties of up to 200% of underpaid wages, plus the added incentive of public naming. Seasonal hiring tends to increase the risk of accidental slip-ups, so payroll processes are well worth a sense check.

High-Value Council Tax Surcharge (from April 2028)

Looking a little further ahead, the government also plans to introduce a High-Value Council Tax Surcharge for residential properties in England valued at £2 million or more, expected to take effect from April 2028.

Key things to know:

• A new property valuation exercise is planned for 2026

• The surcharge won’t rely on existing council tax bands

• Properties valued at £2m+ will fall into entirely new surcharge bands

This could significantly increase annual costs for owners of high-value homes, particularly in London and other premium areas. Properties that have historically avoided higher council tax bands may still be caught once valuations are updated.

The takeaway

Dividend tax is rising, wage rules remain tightly enforced, and higher-value property owners have future changes to keep on their radar. None of this means panic — but it does mean planning.

A quick review now can help avoid last-minute decisions later, especially as April 2026 creeps closer.

If you’d like to talk through what this means for your business or personal tax position, you know where we are — just an email or call away, as always.

Categories: Positive Accountant