The UK government is increasing the dividend tax rates by 2 percentage points for basic and higher rate taxpayers from April 6, 2026. This change is part of a broader government strategy to ensure income from assets is taxed more comparably to income from employment or self-employment, which is subject to National Insurance contributions.
Key Details of the Increase
- New Rates: The rates of tax on dividend income will increase as follows from the 2026-2027 tax year:
- Basic Rate: Rises from 8.75% to 10.75%.
- Higher Rate: Rises from 33.75% to 35.75%.
- Additional Rate: Remains unchanged at 39.35%.
- Dividend Allowance: The tax-free dividend allowance remains at £500, having been significantly reduced in recent years
- Implementation: The changes are included in the Finance Bill 2025 to 2026 and will be effective from April 6, 2026
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