The 2026/27 tax year brings a sting in the tail for business owners. With the new rates now in effect, the “standard” way you pay yourself might not be the most tax-efficient anymore.
The Key Changes:
- Dividend Tax Hike: Rates have risen by 2%. The basic rate is now 10.75%, and the higher rate has jumped to 35.75%.
- The £500 Allowance: The Dividend Allowance remains frozen at just £500, meaning almost all your dividends are now taxable.
- Capital Gains & BADR: For those planning to sell their business, the Business Asset Disposal Relief (BADR) rate has officially increased to 18%.
What should you do? If you typically take a small salary and large dividends, your tax bill is about to increase. Now is the time to review:
- Pension Contributions: Are you maximizing employer pension contributions to reduce Corporation Tax and personal tax?
- Family Tax Planning: Are you utilizing a spouse’s lower tax bands effectively?
- Director’s Loans: Remember, the Section 455 charge on overdue loans has also mirrored the dividend hike, rising to 35.75%.
Don’t wait until the end of the year to see the impact—let’s run the numbers now to ensure your 2026/27 take-home pay is protected.
Grace Bellairs, here to help with all your accounting needs!