Need to know
There’s only a week before changes begin
Chancellor of the Exchequer Rachel Reeves(Image: Wiktor Szymanowicz/Future Publishing via Getty Images)
Need to know: Dividend tax hike to hit UK Investors from April 2026
- Dividend tax changes coming into force from April 6, 2026, will hit millions of UK investors as Chancellor Rachel Reeves’ Budget measures take effect.
- Tax rates on dividend income above the £500 annual allowance will rise by two per cent for basic and higher rate taxpayers. The ordinary rate will jump from 8.75 per cent to 10.75 per cent, while the upper rate increases from 33.75 per cent to 35.75 per cent.
- The changes are part of a decade-long squeeze on dividend investors, with the tax-free allowance slashed by 90 per cent from £5,000 to just £500. A basic rate taxpayer earning £10,000 in dividends will see their tax bill rise from £375 in 2016-17 to £1,021.25 from April 2026.
- Research from J.P. Morgan Personal Investing found 44 per cent of UK investors say the changes will impact their portfolios. This rises to 59 per cent among those with over £250,000 in investible assets.
- Charlotte Wheeler, wealth manager at J.P. Morgan Personal Investing, said: “Over the last decade, dividend tax changes have been a popular tool to raise new tax receipts, dragging more investors into paying tax on their investments.”
- She advised investors to consider moving income-generating investments into ISAs when annual allowances refresh on April 6. The ‘Bed and ISA’ strategy involves selling investments outside tax-free wrappers and moving funds into ISAs or pensions.
- The changes are expected to raise £280 million in new tax receipts for HM Treasury in 2026-27.
- READ THE FULL STORY: HMRC April 6 2026 tax rule change as one group ‘most impacted’
