Why the Dividend Additional Rate Remains Unchanged in 2026

At PayLess Accountants, we break down the key factors driving this policy choice and explain what it means for taxpayers.

1. Stabilising Revenue Without Deterring High-Level Investment

Additional-rate taxpayers contribute a significant portion of dividend tax revenue. By keeping this rate unchanged, policymakers aim to maintain predictability for high earners, ensuring investment behaviour remains steady. A steep increase at the top tier might discourage portfolio investments or dividends taken through limited companies.

2. Targeted Tax Adjustment for Middle-Income Groups

The 2% rise in the ordinary and higher rates is strategically designed to increase tax collection from a wider income base, rather than placing additional pressure on the highest earners. This approach spreads the revenue impact more evenly while avoiding placing further strain on top-rate taxpayers, who already contribute at the highest marginal level.

3. Avoiding Excessive Tax Burden at the Top End

The additional rate already sits at a comparatively high 39.35%. Increasing it further could risk positioning the UK as less competitive for high-net-worth individuals and businesses. Maintaining the current rate helps ensure the tax environment remains balanced and internationally competitive, especially in an era where countries are reconsidering their tax structures to prevent capital flight.

4. Administrative Simplicity

With only ordinary and higher rates changing, the system avoids unnecessary complexity. The government has emphasised that the way individuals report and pay tax on dividends will stay the same, and limiting changes to two brackets helps maintain operational efficiency for HMRC.

5. Predictability for Strategic Financial Planning

For those in the additional-rate band, stability allows for clearer long-term planning. Whether managing investments, drawing dividends from a business, or planning pension contributions, knowing that the additional rate remains unchanged supports greater financial confidence.

Final Thoughts

While tax changes can feel unsettling, the decision to leave the dividend additional rate untouched in 2026 reflects a strategic balance between increasing revenue and maintaining economic stability. For taxpayers across all brackets, planning ahead is essential.

At PayLess Accountants, we help individuals and business owners understand how tax changes impact them and provide tailored strategies to minimise liabilities while staying compliant.

If you need personalised advice on dividend tax planning for 2026 and beyond, we’re here to help.