A number of significant tax increases take effect from 6 April 2026 and for many individuals and business owners this is the last opportunity to take action before the changes start impacting tax bills.

For individuals, there will be an increase in the rate of income tax on dividends for basic and higher rate taxpayers and the rate of capital gains tax on disposals qualifying for Business Asset Disposal Relief (BADR) will also increase.

For companies, the rate of the section 455 charge on director’s loans will increase, meaning companies should be reviewing their position before the new tax year begins.

Below, we explain what is changing, why it matters and the practical steps you may want to consider in the coming weeks.

Income tax rates on dividends rise from April 2026

If you are a basic or higher rate taxpayer and you receive dividend income - particularly if you’re a director‑shareholder - the cost of extracting profits will increase from 6 April 2026.

The rates for basic and higher taxpayers are due to rise by 2 percentage points, moving from:

• 8.75% to 10.75% (basic rate); and
• 33.75% to 35.75% (higher rate.

The additional rate remains at 39.35%.

These increases make dividend extraction more expensive for most taxpayers and come at a time when the Dividend Allowance is already at a historically low £500.

If your company has sufficient reserves, there may still be time to accelerate dividend payments before 6 April 2026, to benefit from the lower tax rates. Directors must ensure the necessary documentation is in place and the correct procedures around declaration and payment are followed.

s455 charge on directors’ loans increases

As the section 455 tax charge is directly linked to the higher rate of dividend tax, the rate applied to loans made to participators will increase from 33.75% to 35.75% for loans advanced on or after 6 April 2026. Importantly, this increased rate will not apply retrospectively to loans already outstanding at 5 April 2026; only new loans made from 6 April onwards will be subject to the increased rate of 35.75%.

The s455 charge applies where a loan to a participator remains outstanding nine months after the company’s year-end, potentially impacting cashflow and increasing costs where balances are not cleared in time.

It is common for director‑shareholders to borrow from their company during an accounting period and subsequently clear the loan balances with a post year-end dividend once the accounts are prepared and profits are known. There may therefore still be scope for pre‑5 April planning. For example, where distributable reserves allow, participators may consider accelerating dividends that are credited directly to their loan accounts to clear loans relating to the prior accounting period while dividend tax rates are at the lower rate of 33.75%.

However, consideration must be given to the “bed and breakfasting” rules and noting that any accelerated dividend will increase the participator’s taxable income for the current tax year (2025-26), and the potential 2% saving on the dividend rate needs to be weighed against the wider income tax impact. As ever, the best approach will depend on personal circumstances and the company’s available distributable reserves.

Business Asset Disposal Relief (BADR) rate rises to 18%

For many years, BADR has allowed eligible business owners to pay a reduced rate of Capital Gains Tax (CGT) on qualifying capital gains. Following an increase to the rate in April 2025 a further increase from 14% to 18%, will apply for qualifying disposals on or after 6 April 2026.

This means owners considering a sale, or restructuring involving disposals, have a short window in which to benefit from the current lower capital gains rate.

If you are already in a position to dispose of business assets or shares and meet the BADR conditions (such as holding 5% share capital and voting rights for two years), it may be worth exploring whether a disposal before April is viable. To secure the 14% rate, the disposal must complete before 6 April 2026. Anti-forestalling rules were introduced so that completion of the disposal must occur pre-6 April 2026, therefore just signing a contract before this date will not be sufficient, if completion is later.

Why taking action before April matters

Across these areas, the theme is the same: waiting until after 5 April could cost more.

Whether it’s higher dividend tax, an increased s455 charge, or reduced CGT relief, the coming tax year brings unavoidable rises. The final weeks before year‑end are therefore an important opportunity to check your position, take advice and make informed decisions.

How we can help

The right course of action depends on your personal circumstances, your business structure and your future plans. If you’d like tailored advice on any of the changes outlined above, please contact a member of our expert Private Client Tax and Corporate Tax teams, or by filling out the short form below.

You can find out more in our year-end tax planning guide.