Dividend Tax Hike: What the Latest Budget Means for UK Investors

In a Budget speech filled with a long list of tax adjustments, one announcement stood out sharply for millions of UK savers and investors: dividend tax rates are increasing once again. This marks yet another tightening of the tax landscape for individuals who rely on investments, especially those with portfolio income, owner-managed businesses, or retirement strategies built around dividend payments.

From April 2026, dividend tax rates will rise across the board:

Basic-rate dividend tax: increasing from 8.75% to 10.75%

Higher-rate dividend tax: increasing to 35.75%

Additional-rate dividend tax: remaining the same at  39.35%

This represents a 2% increase for basic-rate taxpayers and a further squeeze on higher earners already facing reduced allowances elsewhere.

While the Government has chosen to keep the £500 dividend allowance, this is far from the good news it may appear to be.

Once a generous £5,000 in 2016, the allowance has been repeatedly slashed to £2,000, then £1,000, and now just £500. With the new higher dividend tax rates, most investors will feel very little benefit from its frozen level. For directors of small, limited companies who pay themselves via dividends, the squeeze is even more pronounced.

The Treasury expects the change to generate significant additional revenue. Their figures show:

£280 million raised in the first year (2026–27)

Rising to nearly £1 billion by 2027–28

Reaching £1.16 billion per year from 2028 onwards

If you’re unsure how these upcoming changes could affect your investment returns, tax position, or long-term financial strategy, call us today we can help you review your situation and put the right planning in place.