How should I pay myself now the dividend rates have risen?
Dividend tax went up two points in April 2026, so the best salary, dividend and pension split changed this year. Seven steps work out yours on the new rates, and what last year's split now costs.
Why this exists: Dividend rates +2 points, April 2026. Typically £1,000–£8,000.
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Rates as at 6 April 2026 — the 2026/27 tax year.
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The rules behind this
Every figure above comes from one of these. Where the tool has interpreted rather than calculated, it says so in the finding.
Dividend rates from April 2026 are 10.75%, 35.75% and 39.35% after a £500 allowance.
A dividend may only be paid out of profits available for distribution.
Corporation tax is 19% to £50,000 and 25% above £250,000, with a 26.5% marginal rate between; limits are divided by the number of associated companies.
Employer pension contributions are deductible in the period paid and are not earnings for National Insurance.
An overdrawn director's loan outstanding nine months after the period end attracts a 33.75% charge.
Questions people ask
What actually changed in April 2026?
Dividend tax rose two percentage points at the ordinary and upper rates — 8.75% to 10.75%, and 33.75% to 35.75%. Nothing else about the structure changed, which is why the old advice still looks right and quietly is not.
Is a company still worth it?
For most directors taking a normal split, yes, but by less than before. The advantage was never the dividend rate on its own — it is that dividends carry no National Insurance and profit can be left in or pensioned.
Why is the salary usually the personal allowance?
Below it there is no income tax and the salary is still deductible against corporation tax. Above it you start paying income tax and NI on money that could have come out as a dividend instead.
Does the pension contribution have to be within my annual allowance?
The company gets its deduction either way, but you are personally charged on contributions above your allowance, which cancels the benefit. Carry-forward from three previous years often covers a large one-off.
What if I have taken more than the company has in reserves?
Then it was not a dividend. It is a director's loan, and anything still outstanding nine months after the year end attracts a 33.75% charge — refundable when repaid, but a real cash cost in the meantime.