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Taxation
Navigating the dividend
tax rises in 2026
How to safeguard your investment income from higher tax rates
From 6 April 2026, the government increased dividend tax rates by 2
percentage points. The ordinary rate rose to 10.75%, and the upper rate to
35.75%, while the additional rate remains at 39.35%. However, you don’t pay tax
on dividend income within your personal allowance (£12,570 for 2026/27) or
your annual dividend allowance of £500.
T
your ISA allowance is key. Dividends on
Sharing wealth and diversifying
income streams
investments held in an ISA are entirely
If you’re married or in a registered civil partnership,
tax-free. For the 2026/27 tax year, you
o reduce dividend tax, maximising
While tax-efficient investing is crucial, tax rules
shouldn’t be the sole driver of your decisions.
Professional advice will help you build a diversified
portfolio tailored to your goals, ensuring you pay no
more tax than necessary. t
Looking to shield
your wealth from
rising dividend taxes?
you can reduce your dividend tax bill by holding
We can discuss smart strategies to minimise
can invest up to £20,000 in ISAs. This use-it-or-
income-generating investments in the name of the
your tax bill and maximise your investments,
lose-it allowance cannot be carried forward, so
partner in a lower tax band. This approach ensures
tailored to your financial goals. If you require
systematically moving taxable investments into an
that both partners fully utilise their individual ISA and
further information or wish to discuss how
ISA can shield a significant portion of your portfolio
dividend allowances.
these changes to dividend taxation could affect
from tax increases.
Diversifying income streams can also help. For
your personal portfolio, please contact us.
example, payouts from bond funds are treated as
Exploring pension benefits
and long-term saving
interest and may fall within your personal savings
Dividends received by pension funds are also
realise a capital gain allows you to use your annual
tax-free, making pensions another effective way
CGT exemption, further reducing your tax bill.
allowance. Additionally, selling investments to
to protect your wealth. Contributions to pensions
boosting your savings by 20% to 45% before any
Adopting a total return approach
to investing
returns are generated.
A total return approach, which combines dividend
receive tax relief at your marginal income tax rate,
When drawing income from your pension,
income and capital gains, can maximise tax
withdrawals above the tax-free lump sum (usually
allowances, enhance returns and reduce volatility.
25% of your pot, up to £268,275) are taxed as
High dividend yields aren’t always sustainable and
regular income. Proper planning ensures this
may signal financial distress. A total return strategy
strategy aligns with your timeline and minimises tax
builds resilience by selecting investments expected
liabilities, especially when large withdrawals could
to deliver strong overall performance within your risk
push you into a higher tax bracket.
capacity.
This article is for informational purposes only and
does not constitute tax, legal or financial advice. Tax
treatment depends on individual circumstances and
may change. A pension is a long-term investment not
normally accessible until age 55 (57 from April 2028,
unless the plan has a protected pension age). The value
of your investments (and any income from them) can
go up or down, which will affect the level of pension
benefits available. Investments can rise or fall in value,
and you may receive back less than you invest.
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