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Deadlines and penalties
Dividend tax in 2026 to 2027 for a director client: the 10.75% and 35.75% rates worked at three dividend levels
Dividend tax rose by two points in April 2026. A director on a £12,570 salary worked at £20,000, £40,000 and £60,000 of dividends, against last year.
From 6 April 2026 the dividend tax rates for basic and higher rate taxpayers each went up by two percentage points. GOV.UK now lists 10.75% for the basic rate, 35.75% for the higher rate and 39.35% for the additional rate, which did not change. The £500 dividend allowance stays the same. For a practice with owner-managed company clients, this is the figure most directors will ask about when their 2026 to 2027 Self Assessment estimate lands.
The rates for 2026 to 2027
GOV.UK's page on tax on dividends gives these for the tax year 6 April 2026 to 5 April 2027:
| Band | Dividend rate 2026 to 2027 | Dividend rate 2025 to 2026 |
|---|---|---|
| Basic rate | 10.75% | 8.75% |
| Higher rate | 35.75% | 33.75% |
| Additional rate | 39.35% | 39.35% |
The bands themselves are unchanged. The Personal Allowance is £12,570, the basic rate runs to £50,270 and the higher rate to £125,140. GOV.UK says to work out the band by adding dividend income to other income, and that you may pay tax at more than one rate.
How dividends sit on top of salary
Dividends are taxed last, after salary and other income. The £500 allowance is a 0% rate, not a deduction: the £500 still uses up part of the band it falls in. That point decides how much of a director's dividend lands in the higher rate, so it is worth getting right in a client's estimate.
Take the common pattern of a director paying themselves a salary equal to the Personal Allowance, £12,570, and taking the rest as dividends. The salary uses the allowance. Every pound of dividend then falls into the basic rate band of £37,700 (£12,571 to £50,270), until that band runs out.
Three directors worked through
All three have a £12,570 salary and no other income.
£20,000 of dividends. The whole £20,000 is within the basic band. £500 is at 0% and £19,500 is at 10.75%, which is £2,096.25. At last year's 8.75% it would have been £1,706.25. The rise is £390.
£40,000 of dividends. The basic band holds £37,700 of it. £500 is at 0%, and £37,200 at 10.75% is £3,999.00. The remaining £2,300 is at 35.75%, which is £822.25. The total is £4,821.25. At last year's rates it would have been £3,255.00 plus £776.25, so £4,031.25. The rise is £790.
£60,000 of dividends. Again £37,200 at 10.75% is £3,999.00. The remaining £22,300 is at 35.75%, which is £7,972.25. The total is £11,971.25, against £10,781.25 last year. The rise is £1,190. Total income here is £72,570, well short of the £100,000 point where the Personal Allowance starts to taper.
| Dividends | Tax 2026 to 2027 | Tax 2025 to 2026 | Increase |
|---|---|---|---|
| £20,000 | £2,096.25 | £1,706.25 | £390.00 |
| £40,000 | £4,821.25 | £4,031.25 | £790.00 |
| £60,000 | £11,971.25 | £10,781.25 | £1,190.00 |
The rule of thumb you can give a client
For any director below the additional rate, the increase is 2p for every pound of dividend above the £500 allowance. £19,500, £39,500 and £59,500 at 2% give £390, £790 and £1,190, matching the table. A client who asks "what does the rise cost me?" can have an answer on the phone in one line, before you run their full computation.
What to check for each director client
- Is the salary still at £12,570, or has the client moved it? A higher salary pushes more dividend into the higher rate.
- Does the client have other income, such as rent or savings interest? That sits below dividends and uses the band first.
- Will total income pass £100,000? Above that, the Personal Allowance tapers and the effective rate on the next slice of income rises sharply.
- Is the director the only employee? If so, the company cannot claim Employment Allowance against the salary; our guide to which clients can claim the £10,500 Employment Allowance sets out why.
When the tax is due
Dividend tax for 2026 to 2027 is paid through Self Assessment, with the balancing payment due on 31 January 2028 and payments on account for the following year on top. A director whose dividends fell this year may want to cut those payments; our guide to reducing payments on account with an SA303 covers the interest risk. If you price an annual dividend planning review, the client fee calculator shows what the fee pays you per hour.
Overlyft builds AI staff who join your team and prepare a first-pass dividend estimate for each director client from last year's figures, ready for you to check and send, so every client hears about the April 2026 change before January.
This is general information, not tax advice. Check GOV.UK and the client's own figures before you advise.
Where this comes from: GOV.UK, Tax on dividends (dividend allowance £500; rates for 6 April 2026 to 5 April 2027 of 10.75% basic, 35.75% higher and 39.35% additional); GOV.UK, Income Tax rates and Personal Allowances (Personal Allowance £12,570, basic rate to £50,270, higher rate to £125,140). Both read 7 October 2026. The 2025 to 2026 rates of 8.75% and 33.75% are from GOV.UK's earlier published rates.
AEO Lookup editorial team
We write practical guides for people who run small UK firms, and we check every fact against its source on the date shown. Read how we review, or tell us if something has changed.
