Ten thousand pounds of dividends wholly inside the ordinary dividend band creates £1,075 of tax in 2026/27, compared with £875 in 2025/26. Put the same taxable amount wholly inside the upper band and the figures become £3,575 and £3,375. In either case, the increase is £200.
That £20 per £1,000 is the cleanest way to understand the 2026/27 change. It is not the whole owner-director calculation, because dividends sit on top of salary and other income, but it gives a reliable sense of scale before running the actual figures.
What changed on 6 April 2026
Budget 2025 raised two of the three dividend rates by two percentage points:
| Dividend rate | 2025/26 | 2026/27 | Change per £1,000 taxed in the band |
|---|---|---|---|
| Ordinary | 8.75% | 10.75% | £20 more |
| Upper | 33.75% | 35.75% | £20 more |
| Additional | 39.35% | 39.35% | No change |
The £500 Dividend Allowance also remained unchanged. HMRC describes the allowance as an amount charged at a 0% dividend rate. The dividends still count when determining which rate band later income occupies.
If that mechanism is unfamiliar, the £500 Dividend Allowance guide shows the allowance's cash value and why it does not create extra basic-rate capacity.
The government published the change in its Budget 2025 tax legislation overview. HMRC's current and previous Income Tax rates provide the enacted 2026/27 schedule alongside the previous three years.
A worked comparison needs a band assumption
“A £30,000 dividend now costs £600 more” is only safe if the same £30,000 remains taxable and sits in ordinary or upper bands in both years. A real director's dividend can cross a boundary, use the Dividend Allowance or sit partly inside the Personal Allowance.
Consider an illustrative £10,500 dividend after all salary and other income have already been positioned. The first £500 uses the Dividend Allowance, leaving £10,000 taxable.
If that £10,000 is wholly within the ordinary band:
- 2025/26: £10,000 × 8.75% = £875
- 2026/27: £10,000 × 10.75% = £1,075
- increase: £200
If it is wholly within the upper band, the bill rises from £3,375 to £3,575. If it is already in the additional band, this particular rate change adds nothing because 39.35% did not move.
Those examples isolate the dividend-rate decision. They do not include Corporation Tax, National Insurance or the company profit needed to fund the dividend.
Salary comes first
Income is not taxed in separate jars. Non-savings income such as salary is positioned before dividends. Salary can therefore use the Personal Allowance and basic-rate band before the dividend calculation begins.
Suppose two directors each receive the same dividend but one has a higher salary or other employment income. More of that person's dividend can fall into the upper band, producing a different tax bill. The dividend amount alone is not enough to reproduce the answer.
Tax Shrink's personal-tax calculator shows the band-by-band result for salary and dividends. The salary and dividend calculator goes further by including employer National Insurance and Corporation Tax for the supported single-director company scenario.
The calculation deliberately excludes pensions, student loans, benefits in kind, other income and reliefs. Those omissions can change which band the dividend reaches. Check the full methodology before using a comparison for a real extraction decision.
Scottish taxpayers use the same dividend rates
Scottish Income Tax rates apply to non-savings, non-dividend income such as salary and pensions. Dividend rates are set UK-wide. A Scottish director therefore pays the same 10.75%, 35.75% and 39.35% dividend rates as a director elsewhere in the UK.
Region still matters because Scottish salary bands can leave a different amount of UK-wide band capacity for the dividends that follow. This is why the calculator keeps the Income Tax region visible even though the dividend schedule itself is shared.
The distinction is easy to lose in articles that compare “Scottish tax rates” with “English tax rates” without separating types of income. The tax-rate page shows the regional salary schedules and UK-wide dividend schedule separately.
The company side did not disappear
A dividend is paid from distributable profit after Corporation Tax. Raising the personal dividend rate does not mean salary automatically wins: salary can trigger employer and employee National Insurance, and it reduces company profit before Corporation Tax.
The useful comparison is the amount the director keeps after the company and personal taxes modelled for the same profit. At some profit levels, nearby salary choices produce very similar results. Payroll simplicity, contribution records, cash timing and circumstances outside the model can then matter more than a small estimated difference.
The annual 2026/27 owner-director retrospective explains how the higher dividend rates sit beside frozen National Insurance and Corporation Tax rules. This focused guide answers the narrower question: what did the rate increase do to a taxable dividend?
What to check next
Confirm the tax year, annual salary, total dividends and any income outside the company. Then identify whether the Dividend Allowance and Personal Allowance remain available. If the result crosses a band boundary, check the detailed rows rather than applying one percentage to the entire dividend.
For a planned dividend, also confirm that the company has sufficient distributable reserves. A personal tax estimate does not establish the company-law position or replace the records needed to declare a dividend correctly.