2026/27 Tax Year Changes for Company Directors
What's changing in April 2026, what it costs in real terms, and whether you need to act.
Key takeaways
- Dividend tax is increasing again. Basic rate rises from 10% to 10.75%. Higher rate from 35% to 35.75%. The third increase in four years.
- Income tax thresholds remain frozen at 2022/23 levels through 2027/28. No change, but fiscal drag means you may pay more anyway.
- Employer NI stays at the elevated 15% rate with the £5,000 secondary threshold — both introduced in April 2025. No new change, but the impact continues.
- The optimal director's salary is still £12,570. None of these changes affect the salary recommendation. See our optimal salary guide →
- For a director with £50,000 profit, the dividend tax increase costs approximately £217 more per year. The impact is real but modest for most.
- Corporation tax rates are unchanged. 19% small profits rate, 25% main rate.
The UK tax year changes on 6 April 2026. For company directors, April 2026 brings the latest in a series of incremental tax increases that have been accumulating since 2022. No single change is dramatic, but the cumulative effect is significant.
This guide covers every tax change relevant to limited company directors for 2026/27, with the actual numbers, worked examples showing the pound impact at real profit levels, and guidance on whether pre-April action is warranted.
It does not cover changes to capital gains tax, inheritance tax, ISAs, stamp duty, pensions, or employee-only changes. Those are important but don't directly affect the director salary-and-dividend question. For a complete overview of how director pay works, see our guide to paying yourself from a limited company.
Not financial advice
This guide explains the general principles for illustrative purposes. It is not financial advice. Always discuss your specific circumstances with a qualified accountant.
The Headline Change
Dividend tax rates are increasing — again
The Finance Act 2025 legislated a further 0.75 percentage point increase to basic and higher rate dividend tax from 6 April 2026. This is the second increase in two years and the third since 2022.
| Band | 2024/25 | 2025/26 | 2026/27 | Change |
|---|---|---|---|---|
| Basic rate (up to £50,270) | 8.75% | 10.00% | 10.75% | +2.00pp |
| Higher rate (£50,270–£125,140) | 33.75% | 35.00% | 35.75% | +2.00pp |
| Additional rate (above £125,140) | 39.35% | 39.35% | 39.35% | Unchanged |
The dividend allowance remains at £500 — down from £2,000 just two years ago. Combined with the rate increases, the total dividend tax burden has increased significantly since 2022/23.
Source: gov.uk — Tax on dividends, verified 2026-03-16
What this means in practice
- For every £10,000 of dividends above the £500 allowance, you'll pay £1,075 in tax at the basic rate — up from £1,000 in 2025/26 and £875 in 2024/25.
- The additional rate is unchanged at 39.35%. If your total income exceeds £125,140, the dividend tax increase doesn't affect your highest-band income.
What It Actually Costs
How much more will you pay? Three worked examples
Each example assumes a single director, no other income, and an optimal salary of £12,570.
£30,000 Company Profit
| 2025/26 | 2026/27 | |
|---|---|---|
| Salary | £12,570 | £12,570 |
| Dividends | £13,199 | £13,199 |
| Dividend tax | £1,270 | £1,365 |
| Total take-home | £24,499 | £24,403 |
The 2026/27 changes reduce your take-home by approximately £95 per year.
£50,000 Company Profit
| 2025/26 | 2026/27 | |
|---|---|---|
| Salary | £12,570 | £12,570 |
| Dividends | £29,399 | £29,399 |
| Dividend tax | £2,890 | £3,107 |
| Total take-home | £39,079 | £38,862 |
The 2026/27 changes reduce your take-home by approximately £217 per year.
£100,000 Company Profit
| 2025/26 | 2026/27 | |
|---|---|---|
| Salary | £12,570 | £12,570 |
| Dividends | £67,176 | £67,176 |
| Dividend tax | £13,912 | £14,537 |
| Total take-home | £65,834 | £65,210 |
The 2026/27 changes reduce your take-home by approximately £625 per year. Some dividends are taxed at the higher rate at this profit level.
These examples assume a single director, no other income, and the optimal salary of £12,570. Your figures may differ — use our calculator for a personalised result.
See the exact impact for your company
Enter your company profit and see your full tax breakdown for 2026/27 — including the new dividend tax rates.
Open the calculatorTiming
Should you take dividends before 6 April 2026?
This is the question on every director's mind as the tax year ends. The answer depends on your specific situation, but here is a framework for thinking about it.
Taking additional dividends before April may make sense if:
- •You have substantial retained profits (distributable reserves) in the company
- •Those dividends would be taxed at the basic rate (total income below £50,270)
- •You were planning to extract these profits as dividends anyway during 2026/27
- •At the basic rate, you'd save 0.75p per pound of dividends — £75 per £10,000
It probably doesn't make sense if:
- •Taking large dividends would push you into the higher rate band (where the saving is the same 0.75pp but the tax rate is already 35%)
- •Your company doesn't have sufficient distributable reserves
- •You'd need the cash in the company for business purposes
- •The administrative cost of declaring additional dividends outweighs the saving
Important caveats: Dividends can only be paid from distributable profits (retained earnings after tax). You cannot manufacture dividends to avoid the rate increase. If you have an accountant, discuss this with them before acting. The saving at the basic rate is 0.75pp — that's £75 per £10,000 of dividends. For most directors, this is worth knowing about but not worth restructuring around.
The decision to accelerate dividends has tax, cash flow, and legal implications. This section provides a framework for discussion with your accountant, not a recommendation.
Still In Effect From 2025
Employer National Insurance: the big change from last year
This is not a new change for April 2026 — it took effect in April 2025 — but it is the most significant ongoing cost change for directors and worth understanding in context.
| Before April 2025 | April 2025 onwards | |
|---|---|---|
| Employer NI rate | 13.8% | 15% |
| Secondary threshold | £9,100 | £5,000 |
| Employment Allowance | £5,000 | £10,500 |
What this means for a single director with £12,570 salary:
- Before April 2025: Employer NI = 13.8% × (£12,570 − £9,100) = £479
- April 2025 onwards: Employer NI = 15% × (£12,570 − £5,000) = £1,136
- Increase: £657 per year in employer NI
This cost is deductible for corporation tax purposes, so the net impact is lower — approximately £532 after CT relief at 19%.
Employment Allowance
The Employment Allowance increased to £10,500 to offset the NI increase — but most single-director companies are not eligible. You must have at least one other employee (not just the director). If you are eligible, the £10,500 allowance more than covers the employer NI on a £12,570 salary.
Source: gov.uk — NI rates and thresholds 2026/27, verified 2026-03-16
Fiscal Drag
Income tax thresholds: frozen, not forgotten
If your income has grown since 2021 but these thresholds haven't moved, more of your income falls into higher tax bands. This is sometimes called “fiscal drag” — a tax increase without changing any rates.
| Threshold | Amount | Frozen Since | Frozen Until |
|---|---|---|---|
| Personal allowance | £12,570 | 2021/22 | 2027/28 |
| Basic rate limit | £37,700 | 2021/22 | 2027/28 |
| Higher rate threshold | £50,270 | 2021/22 | 2027/28 |
A director whose company profits grew from £50,000 to £60,000 over this period now has dividends falling into the higher rate band (35.75%) that would previously have been taxed at the basic rate.
Dividend allowance erosion
2022/23
£2,000
2023/24
£1,000
2024/25 onwards
£500
Combined with rate increases, the dividend allowance reduction means a basic-rate taxpayer pays approximately £161 more in dividend tax on the lost allowance alone compared to 2022/23.
Source: Autumn Budget 2024 OOTLAR, verified 2026-03-16
Unchanged for 2026/27
What stays the same
Corporation tax rates
19% small profits rate (under £50,000), 25% main rate (over £250,000), marginal relief between.
Personal allowance
£12,570 (frozen, as above).
Employee NI rates
8% between £12,570 and £50,270; 2% above £50,270.
NI primary threshold
£12,570 (aligned with personal allowance).
The optimal director's salary
Still £12,570 for most single-director companies. Read our dedicated guide →
VAT registration threshold
£90,000 (increased from £85,000 in April 2024).
We include unchanged items so you can be confident nothing has been missed. If a rate or threshold isn't listed above as changing, it's listed here as unchanged.
The Bigger Picture
Four years of incremental tax increases
Each change was individually modest, but the pattern since 2022/23 is significant.
| Tax Parameter | 2022/23 | 2026/27 | Change |
|---|---|---|---|
| Dividend allowance | £2,000 | £500 | −£1,500 |
| Dividend basic rate | 8.75% | 10.75% | +2.00pp |
| Dividend higher rate | 33.75% | 35.75% | +2.00pp |
| Employer NI rate | 13.8% | 15% | +1.2pp |
| Employer NI threshold | £9,100 | £5,000 | −£4,100 |
| Personal allowance | £12,570 | £12,570 | Frozen |
For a director taking £30,000 in dividends above the allowance, the cumulative impact of the rate increase alone is approximately £600 per year more in dividend tax. The reduced allowance adds a further £161. These are not dramatic individual changes, but they compound.
Model your full 2026/27 position
Our salary vs dividend calculator uses all the 2026/27 rates. Enter your profit and see your optimal pay structure.
Open the calculatorAlso Worth Noting
Student loan thresholds: minor adjustments
Student loan repayments are calculated on total income (salary + dividends above the threshold). If you have an outstanding student loan, the thresholds determine when repayments begin.
| Plan | 2026/27 Threshold | Rate |
|---|---|---|
| Plan 1 (pre-2012) | £26,900 | 9% |
| Plan 2 (post-2012) | £29,385 | 9% |
| Plan 4 (Scotland) | £33,795 | 9% |
| Plan 5 (post-2023) | £25,000 | 9% |
| Postgraduate | £21,000 | 6% |
Source: gov.uk — Student loan thresholds 2026/27, verified 2026-03-16
Frequently asked questions
Sources
| Source | Verified |
|---|---|
| Income Tax rates and bands | 2026-03-16 |
| Personal allowance and band freeze (Autumn Budget 2024) | 2026-03-16 |
| National Insurance thresholds 2026/27 | 2026-03-16 |
| National Insurance contribution rates | 2026-03-16 |
| Corporation Tax rates | 2026-03-16 |
| Corporation Tax maintained for FY 2026 (Autumn Budget 2024) | 2026-03-16 |
| Tax on dividends | 2026-03-16 |
| Student loan repayment thresholds 2026/27 | 2026-03-16 |
Related guides and tools
Salary vs Dividend Calculator
See your full 2026/27 tax breakdown with the new rates
Optimal Director's Salary 2026/27
Should you take £12,570 or £5,000? The numbers and the reasoning
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This guide provides general information for illustrative purposes. It is not financial advice. Discuss your circumstances with a qualified accountant.