The government will increase the tax rates on dividends and savings income from April 2026. This means many people will pay more tax even if their income does not change. Company owners, investors and anyone who earns interest from savings will feel the impact.

What is changing

The tax rate on dividends will increase by two percent for all bands. Basic rate, higher rate and additional rate taxpayers will all pay more when taking dividends from a company.

Savings income will also face a two percent rate increase. This includes interest earned on bank accounts and investment products that sit outside an ISA.

Why this matters

A rise in the tax rate means the same income will now generate a higher tax bill. This reduces the net return on dividends and savings, which can affect cash flow for company owners and reduce the benefit of saving or investing outside protected accounts. Even small percentage increases can add up over time, especially for those who receive regular dividends or large amounts of interest. This is why understanding the impact early and planning around it is important.

Who will be affected

Any company director who takes dividends rather than salary will see their tax bill rise.
Anyone with savings held outside an ISA will pay more tax on the interest they earn.
Investors who receive dividend income from shares will also be affected, including those using general investment accounts.

What you can do to plan ahead

There are several ways to reduce the effect of the new rates. Using ISA can protect interest and dividends from tax. Reviewing the balance between salary and dividends may help company owners keep more of their income. Family planning opportunities such as dividend splitting may still be available if the structure is set up correctly.
It may also be useful to review investment accounts to ensure income is held in the most tax efficient place.

Final thoughts

The increase in tax on dividends and savings income from April 2026 is another step that reduces how much individuals and business owners can take home. Early planning is important. Small changes to how income is withdrawn, saved or invested can make a noticeable difference to the amount that remains in your pocket.