From 6 April 2026, changes to dividend taxation will affect many freelancers, contractors, and company directors, potentially reducing their take-home pay by up to £1,400 annually. The basic dividend tax rate will rise from 8.75% to 10.75%, while the higher rate will increase from 33.75% to 35.75%.
For example, a company director earning around £50,000 a year through a mix of salary and dividends could face an extra £600 in tax. Those with income near £100,000 might see their tax bill increase by about £1,400 due to the higher rate hike.
Seb Maley, CEO of Qdos, advises company directors to review their remuneration strategies ahead of the changes: “Now is the crucial time for company directors to assess how they structure their income and consider making the most of the current dividend tax thresholds before the new rates take effect. Many directors combine salary and dividends compliantly, but these upcoming tax increases could impact their overall take-home pay significantly.”
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Maley adds, “It’s vital for limited company directors to ensure full tax compliance as HMRC will be monitoring closely once the new rates come into force. Directors should also explore options like tax-efficient pension contributions or spreading dividends over multiple tax years to mitigate the impact.”
Tax experts recommend that affected individuals evaluate their salary and dividend mixes promptly to minimise any negative financial consequences from the tax changes.