Tax year: 2026/27 — 6 April 2026 to 5 April 2027. Reviewed 6 October 2026.
A sensible dividend plan connects company profits with the director’s personal needs. It is not simply a target amount to withdraw every month. Before paying a dividend, check that the company can support it, that the share rights are understood and that the personal tax calculation includes your other income.
Company profit comes first
A dividend must be supported by distributable profits. Cash in the bank can include money needed for taxes, suppliers or wages, so it is not a substitute for accounts. Use up-to-date figures and keep the decision records and dividend vouchers.
A transfer described as a dividend after the event may create accounting and legal problems. Review the intended payment before moving money.
What changed for 2026/27?
The dividend allowance is £500. Above any available allowances, dividend rates are 10.75%, 35.75% and 39.35%, according to the bands the income occupies. Our separate dividend tax rates guide explains those rates in more detail.
Include salary, property income, pensions and other relevant income in the forecast. The dividend allowance does not create an extra tax band, and the Personal Allowance can reduce at higher adjusted net income.
A basic-rate example with clear assumptions
Suppose a director has £12,570 salary, £37,700 dividends, no other income, the full standard Personal Allowance and no other adjustments. On those assumptions, £500 of dividends falls within the dividend allowance and £37,200 is taxed at 10.75%, giving £3,999 dividend tax.
This example addresses personal tax only. It does not include the company’s corporation tax, employer National Insurance or the costs of running payroll. It is not a recommendation that every director should use this combination.
Salary, dividends and pensions need a joined-up comparison
Salary and employer costs can have a different corporation tax treatment from dividends. Employment Allowance eligibility, other earnings, company profits and personal circumstances can change the result.
Employer pension contributions may also form part of a review, but deductibility, contribution limits and access restrictions need attention. A tax benefit alone does not establish that a pension contribution is suitable. Obtain regulated financial advice where required.
Plan timing without backdating
Review upcoming personal expenses and company commitments before deciding when to pay. A legitimate timing decision can affect the tax year, but dividend records must reflect what actually happened. Do not backdate paperwork to move income into a preferred year.
Do dividends always require a tax return?
Dividends over £10,000 require Self Assessment. Where taxable dividends are £10,000 or less and you do not already file a return, HMRC provides other reporting routes. If you already file, include the dividend income on the return. Check your complete position rather than assuming a director title alone determines the filing requirement.
Your dividend planning checklist
- Confirm distributable profits and share rights.
- Forecast all personal income for the tax year.
- Check company cash commitments before paying.
- Document the payment correctly.
- Reserve cash for the personal tax bill.
Use our salary and dividend calculator as an illustration, explore director tax return support, or book a consultation.
General information, not an individual extraction plan. Sources: dividend tax and dividend reporting.
Talk it through with Digivolve
We set each director’s salary, dividend and pension plan before the tax year starts, then review it in January and March so nothing is left to chance.