In November Autumn Budget, the Chancellor Rachel Reeves confirmed that the basic and higher rates of dividend tax will rise by two percentage points from April 2026.

• The basic dividend tax rate rises from 8.75% to 10.75% from April 2026.
• The higher dividend rate rises from 33.75% to 35.75%.
• The additional dividend rate remains at 39.35%.
• The £500 dividend allowance remains unchanged.

This change will negatively impact on millions of small limited company owners who receive dividends as part of their income. It will also affect investors who rely on dividend-paying shares and funds.

Example of the actual impact;

Earnings for 2026-27 – £12,570 salary + £37,700 dividends

The First £12,570 income is the personal allowance (Tax Free).

The first £500 dividends is the dividend allowance (Tax Free).

The remaining £37,200 dividends are taxed at the new basic dividend rate of 10.75% → £3,999.

But 2025-26 rules: £3,255 tax payable.

Extra tax hike: £744.