A worked example
Each director has a £12,570 salary in both tax years and takes £60,000 of dividends, which is their only dividend in whichever tax year it is paid. (A second £60,000 in the same tax year would use up more of the bands and change the answer, so the page compares like with like.)
| Each director | Paid in March 2027 (2026/27) | Paid in April 2027 (2027/28) | Difference |
|---|---|---|---|
| First £500 at 0% (dividend allowance) | £0.00 | £0.00 | |
| Next £37,200 at 10.75% | £3,999.00 | £3,999.00 | |
| Last £22,300 at 35.75% | £7,972.25 | £7,972.25 | |
| Dividend tax | £11,971.25 | £11,971.25 | £0.00 |
Before the Budget the answer was the same: both years already had these rates.
When it takes effect
Nothing changes. The rates apply from 6 April 2026 with no change announced for 2027/28.
Who it doesn't affect
Every director taking dividends: the Budget did not change dividend tax. The income tax rises from 6 April 2027 are on savings interest and rental income, not dividends.
Also announced
From April 2029, Self Assessment taxpayers who make payments on account will pay their tax in smaller, more regular amounts through the year, collected automatically (for example by Direct Debit), instead of the two payments on account in January and July. Those with enough PAYE income will be able to choose to pay through PAYE instead. For a director whose dividend tax is paid through Self Assessment payments on account, that changes when the tax is paid, not how much it is. How often the payments will be and how the move will work are not yet known: the government says it will set out the detail next year. The documents do not say whether the £1,000 threshold for making payments on account will change.
Where this comes from
- Budget 2026: Overview of Tax Legislation and Rates (HMRC), Annex A, Dividend rates: 10.75%, 35.75% and 39.35% for both 2026/27 and 2027/28; the £500 dividend allowance for both years
- Budget 2026 OOTLAR, Annex A, Income Tax bands and the Personal Allowance: £12,570 and the £37,700 basic rate band for both years
- Budget 2026 (HM Treasury), Table 6.1 (policy decisions): no measure on dividend tax rates or the dividend allowance
- Budget 2026: Overview of Tax Legislation and Rates (HMRC), section 2.31, More Timely Payments for Self Assessment: from April 2029, taxpayers who make payments on account make more regular in-year payments, automated, with the choice of paying through PAYE where eligible
- Budget 2026 (HM Treasury), "A modern and fair tax system": from April 2029, smaller, more regular payments towards the tax bill through the year; and policy decisions, "Measures to close the tax gap and modernise the tax system"
- Timely Payments in Income Tax Self Assessment: summary of responses (HMRC, Budget 2026), section 4 (payments on account now: January in the tax year and July after it, for liabilities over £1,000) and section 6 (automated in-year payments by default from April 2029; frequency, timing and transition to be set out next year)
Every figure on this page comes from the Budget documents published on GOV.UK on , and was checked by Alan Davidson FCA. Last updated . It is general information, not advice on your own position.