Here’s What Limited Company Directors Need To Know
(3 minute read)
HMRC are increasing dividend tax rates again from April 2026.
I assume somewhere in Westminster there remains a belief that every limited company director spends half term on a yacht in Monaco rather than eating a Tesco meal deal in the car between client meetings.
Chancellor Rachel Reeves confirmed the change in the Autumn Budget 2025.
What are the new dividend tax rates from April 2026?
From 6 April 2026:
- Basic rate taxpayers: 8.75% → 10.75%
- Higher rate taxpayers: 33.75% → 35.75%
So yes, dividends are still usually more tax efficient than salary.
But the gap is getting smaller.
The £500 dividend allowance remains unchanged (how generous of them).
Should limited company directors still take dividends?
In many cases, yes
For a lot of owner managed businesses, the traditional structure of:
- a salary of around £12,570
- topped up with dividends
…will still be one of the most tax efficient options.
But it is no longer quite as straightforward as it used to be.
There are now more situations where paying a slightly higher salary can actually make sense e.g. mortgage affordability or where profits exceed £100,000.
This is where proper tax planning matters.
Because there is no longer one “perfect” answer that works for everyone.
Should you pay dividends before April 2026?
Potentially, yes (usual rules apply, you actually need profits!)
Now before everybody gets too excited…do not “empty the company bank account and hope for the best”.
But for some limited company directors, there is a genuine tax saving available by reviewing this before the tax year ends.
The bigger picture for limited companies
What we are slowly seeing is the government reducing the tax advantages of operating through a limited company.
Limited companies are still incredibly valuable e.g. credibility and pension planning.
But the old narrative of “pay yourself mostly dividends and barely any tax” is slowly being relegated to the good old days…
For most owner managed businesses, that means an actual conversation with your accountant, not a Google rabbit hole.
Final thought
If you are a limited company director, this is probably a good year to review how you pay yourself rather than simply rolling forward last year’s approach.
Because small changes in salary, dividends and timing can now make a surprisingly big difference.
If you want to sense-check your salary/dividend mix before April, you know where I am.