As the 2026/27 tax year begins on 6 April 2026, several tax changes and continuing measures may affect how business owners extract profits and plan their finances. Reviewing these changes early can help avoid surprises and allow time to adjust remuneration strategies where necessary.
One of the most notable changes is an increase in dividend tax rates. From April 2026, the basic dividend tax rate increases from 8.75% to 10.75%, while the higher rate rises from 33.75% to 35.75%. The additional rate remains 39.35%.
The dividend allowance remains at £500, meaning only the first £500 of dividend income each year is tax-free. For many director-shareholders who take a combination of salary and dividends, this change may slightly increase personal tax liabilities on profit extraction.
Income tax thresholds also remain frozen, with the personal allowance continuing at £12,570 and the higher-rate threshold at £50,270. While the rates themselves are unchanged, frozen thresholds can gradually increase tax liabilities as profits or salaries rise over time.
Individually, these changes may appear modest, but together they can influence how profits are extracted and taxed. Many directors continue to use a combination of salary and dividends, but it may be worth reviewing remuneration strategies to ensure they remain efficient under the updated rules.
Taking time to review tax planning at the start of the tax year can help business owners manage liabilities and maintain clarity over their overall financial position.
If you would like to discuss your options as a business owner, feel free to get in touch for a no-obligation discussion as to how MCO Accountancy in York can help.