Aug 26

2026

Dividends, salary and pensions after April 2026: what owner-managers should review

The April 2026 tax changes make it worth reviewing how owner-managers extract profits from their companies. From 6 April 2026, the dividend ordinary rate is 10.75%, the upper rate is 35.75% and the additional rate remains 39.35%. The dividend allowance remains £500.

Business Asset Disposal Relief (BADR) also increased to 18% for qualifying disposals from 6 April 2026. The lifetime limit remains £1 million of qualifying gains. Our guide to Dividends, BADR And The April 2026 Rises explains what these changes mean for owner-managers.

Comparing the main extraction routes

The correct mix depends on profits, cash requirements, pension allowances, other income and longer-term exit plans. SCC’s guidance on how management accounts help SME owners can help establish whether the company can comfortably support distributions.

Director loans and capital allowances also changed

The Section 455 charge on relevant outstanding close-company loans is now linked to the 35.75% dividend upper rate. This makes regular review of director loan accounts increasingly important.

The main writing-down allowance for plant and machinery also fell from 18% to 14% from 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax. Our business owner’s guide to capital allowances explains how available reliefs interact.

Pension planning remains important

Employer pension contributions can remain attractive where the company can justify the payment and the director does not require immediate access to the funds.

From 6 April 2029, however, only the first £2,000 of employee pension contributions made through salary sacrifice each year will remain exempt from employee and employer NICs. Employer pension contributions that are not salary sacrifice are not affected by that £2,000 cap.

The wider 2026 tax picture

Inheritance Tax relief also changed from 6 April 2026. A £2.5 million allowance now applies to the combined value of qualifying agricultural and business property eligible for 100% relief, with 50% relief generally applying above that amount. Unused allowance can transfer to a surviving spouse or civil partner.

Making Tax Digital for Income Tax now applies to qualifying sole traders and landlords with income over £50,000, falling to over £30,000 from April 2027 and over £20,000 from April 2028.

Bank Rate is currently 3.75%, having been maintained at that level by the Bank of England in July 2026.

Cross-border owners should also consider the Irish position. Revised Entrepreneur Relief now provides a 10% CGT rate on qualifying gains, with the lifetime limit increased to €1.5 million for disposals from 1 January 2026. SCC’s Cross-border tax specialists can assess both jurisdictions together.

Frequently asked questions

What are the dividend tax rates for 2026/27?

The ordinary rate is 10.75%, the upper rate is 35.75% and the additional rate remains 39.35%.

What is the BADR rate from April 2026?

Qualifying gains on disposals from 6 April 2026 are taxed at 18%, subject to the eligibility conditions and £1 million lifetime limit.

Is salary and dividend planning still worthwhile?

Yes, but the optimum combination is not automatic. Salary, employer NIC, dividend tax, pension funding and company cash flow should be reviewed together.

Are employer pension contributions affected by the £2,000 salary sacrifice cap?

Ordinary employer contributions are not. The change from April 2029 targets employee contributions made through salary sacrifice above £2,000.

When should remuneration planning be reviewed?

At least annually and before significant dividends, pension contributions, share sales or company closures. SCC’s tax compliance and specialist tax teams and SME business solutions team can review the position alongside wider business plans.

Get in touch with the SCC team for a remuneration review covering salary, dividends, pensions, director loans and exit planning for 2026/27 and beyond.