Dividends- Dividend tax rates to rise

Dividends have their own tax rates. Dividends, which are treated as the top slice of income, are taxed at the dividend ordinary rate where they fall within the basic rate band, at the dividend upper rate where they fall within the higher rate band and at the dividend additional rate where they fall within the additional rate band.

For 2025/26, the dividend ordinary rate is set at 8.75%, the dividend upper rate is set at 33.75% and the dividend additional rate is set at 39.35%. The dividend ordinary and upper rates are both increased by two percentage points from 6 April 2026 to, respectively, 10.75% and 35.75%. The dividend additional rate remains at 39.35%.

The dividend allowance remains at £500 for 2026/27.

The rise in the dividend tax rates will affect you if you are a basic or higher rate taxpayer with dividend income. You could consider investing in stocks and shares ISA’s to keep dividend income tax free.

If you operate your business through a personal or family company and have retained profits, consider paying dividends before 6 April 2026 where the pax payable is less than it would be if the profits were extracted after that date.

We can explain what the changes in the dividend tax rates mean for you and what you can do to lessen their impact.