The ordinary and upper dividend rates each rose by two percentage points on 6 April 2026. National Insurance and Corporation Tax largely carried over, making dividend tax the main new variable in a straightforward extraction plan.
These figures apply from 6 April 2026 to 5 April 2027 and were checked against rules enacted and published by 21 August 2026. They assume a sole owner-director of a straightforward UK limited company. Scottish salary tax is compared later; dividend tax remains UK-wide.
The £190 dividend-tax increase
From 6 April 2026, dividend income above the £500 allowance is charged at:
| Dividend band | 2025/26 | 2026/27 | Change |
|---|---|---|---|
| Basic/ordinary | 8.75% | 10.75% | +2 points |
| Higher/upper | 33.75% | 35.75% | +2 points |
| Additional | 39.35% | 39.35% | No change |
The rate depends on where the dividend sits after salary and other income. The dividend allowance is taxed at 0%, but it still uses band capacity. Scottish salary bands do not replace the UK-wide bands used to position dividends.
Assume the standard Personal Allowance is fully used by salary, all £10,000 of dividends remain within the UK-wide basic dividend band and there is no other income:
| Tax year | Dividend tax calculation | Dividend tax |
|---|---|---|
| 2025/26 | (£10,000 − £500) × 8.75% |
£831.25 |
| 2026/27 | (£10,000 − £500) × 10.75% |
£1,021.25 |
The 2026/27 dividend tax is £190 higher. At that salary, employee National Insurance is still zero, while the company has £1,135.50 of employer National Insurance before considering Corporation Tax. More generally, each £1,000 of taxable dividends remaining in the ordinary or upper band costs £20 more than in 2025/26.
The focused 2026/27 dividend-tax guide for company directors compares all three dividend rates and explains why salary must be positioned before the dividend calculation.
The enacted rate change is explained in HMRC's technical note on dividend income and reflected in its current dividend-tax guidance.
The other main company-and-director taxes carried over
Employer NI remained 15% above the £5,000 Secondary Threshold, while the main employee rate remained 8% above £12,570. Corporation Tax retained its 19% and 25% rates and marginal-relief structure. For the straightforward one-person company, the higher dividend rates were therefore the main new variable rather than one part of a wider rate reset.
Scottish salary bands changed, but dividend rules did not
England, Wales or Northern Ireland kept the previous year's salary Income Tax bands. Scotland widened its 19% Starter band to £16,537 of gross salary and its 20% Basic band to £29,526 for someone receiving the full Personal Allowance. Its 21% Intermediate band still ended at £43,662, and the Higher, Advanced and Top rates and thresholds did not change.
Worked examples: why the regional comparison depends on income
For salary only, the standard allowance and no other income:
| Salary | England, Wales or Northern Ireland | Scotland | Difference |
|---|---|---|---|
| £20,000 | £1,486.00 | £1,446.33 | Scotland £39.67 lower |
| £50,000 | £7,486.00 | £8,982.05 | Scotland £1,496.05 higher |
At £20,000, widening the Starter band made the Scottish bill slightly lower. At £50,000, salary had entered Scotland's 42% Higher band while it remained in the 20% band elsewhere. Open the £50,000 Scottish comparison and switch region to reproduce the larger difference. Scottish status follows the taxpayer, not the company; uncertain cases should use HMRC's residence guidance.
Why the £190 does not settle the salary decision
The higher dividend rates narrowed the advantage of some dividend-heavy combinations, but they did not make salary the winner at every profit level. Extra salary can create National Insurance while reducing both Corporation Tax and the amount left for dividends; Scottish salary bands can change the balance again.
If an earlier plan used 2025/26 dividend rates, rerun the same expected profit in the 2026/27 optimiser and compare the full take-home result. The tax-rate page shows the new inputs. The methodology identifies cases—such as Employment Allowance, associated companies or other personal income—that need separate treatment.
Official sources
- HMRC: Income Tax rates and allowances, current and previous years
- HMRC: 2026/27 employer rates and thresholds
- HMRC: 2026/27 dividend-rate technical note
- HMRC: Corporation Tax rates
- Scottish Government: Scottish Income Tax 2026/27
- Scottish Parliament: 2026/27 Scottish Rate Resolution
Continue the series
Previous: UK director tax changes in 2025/26. You can also return to the full tax-year retrospective series.