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Saturday, 30 May 2026

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Trending: Dividend tax rates rose by two percentage points from 6 April 2026

Dividend Tax Is Rising in April 2026: What to Know

From 6 April 2026, the tax on dividends rose by two percentage points — the basic rate went from 8.75% to 10.75% and the higher rate from 33.75% to 35.75%. It only affects dividends held outside an ISA, making the ISA wrapper more valuable.

Last reviewed:  · 2 min read

Key Facts

  • Basic-rate dividend tax rose from 8.75% to 10.75% in April 2026
  • Higher-rate dividend tax rose from 33.75% to 35.75%
  • Dividends inside an ISA remain completely tax-free

What changed and who it hits

Announced in the Autumn Budget 2025, dividend tax rates rose by two percentage points from April 2026. If you hold shares or funds that pay dividends outside a tax wrapper, you now pay 10.75% as a basic-rate taxpayer or 35.75% as a higher-rate taxpayer on dividends above the dividend allowance.

This only affects investments held in a general investment account — not those inside an ISA or pension, where dividends stay tax-free.

Why it makes ISAs more valuable

The change is a nudge towards sheltering investments. Inside a stocks and shares ISA, dividends are completely tax-free regardless of the rate rise, so the higher dividend tax simply doesn't apply.

For a young investor just starting out, the practical takeaway is straightforward: if you're going to hold dividend-paying investments, doing so inside an ISA avoids this tax entirely. The rise mainly stings those investing beyond their ISA allowance.

FAQ

Frequently Asked Questions

Do I pay dividend tax on shares in my ISA? +
No. Dividends from shares or funds held inside an ISA are completely tax-free, and the April 2026 rate rise doesn't change that. The increase only affects dividends from investments held outside an ISA or pension, above the annual dividend allowance.
How much can I earn in dividends before paying tax? +
There's a dividend allowance that lets you earn a set amount of dividend income tax-free each year outside an ISA, on top of your personal allowance. Above that, the new rates apply. Inside an ISA, all dividends are tax-free with no allowance needed, which is why ISAs are popular for investing.
Should I move my shares into an ISA after the dividend tax rise? +
Sheltering dividend-paying investments inside an ISA avoids the tax entirely, which is more attractive after the rise. Moving existing holdings — sometimes called 'Bed and ISA' — can trigger capital gains tax in the process, so it's worth understanding the costs or getting advice before doing it.

Topics covered

tax dividends investing

This article is for informational purposes only and does not constitute financial advice. Always do your own research or speak to a qualified financial adviser before making financial decisions.