Latest blog from the hansen company

Budget 2026 Wrap‑Up: Key Changes That Affect Your Business This April

Following on from our first post in this Budget 2026 series, which looked at the overall context and changes to corporation tax and capital allowances, we now turn to the areas that directly affect business owners’ income and profit extraction strategies. 

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This second part focuses on how the Budget changes impact dividends, income tax, and broader remuneration planning. While some of these adjustments are incremental rather than structural, they will still have a noticeable effect on how much tax is paid when extracting profits from a business and there fore deserve careful attention in advance of April 2026. 

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Part 2: TaxChanges for Owners – Dividends, Income Tax & NIC

Dividend tax rates increase

From April 2026, dividend tax rates increaseby 2% for basic and higher rate taxpayers:

• Basic rate increases from 8.75%to 10.75%
• Higher rate increases from 33.75% to 35.75%

This represents a direct increase in the tax cost of extracting profits through dividends.

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Continued fiscal drag from threshold freezes

Although not a new measure in itself, the continuation of frozen income tax thresholds means more individuals will gradually be pulled into higher tax bands over time as earnings rise with inflation. This increases effective tax pressure without formal rate increases.

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Salary sacrifice pension changes (future impact)

From April 2029, employer National Insurance relief on salary sacrifice pension contributions will be capped, with only the first £2,000 exempt. While this is not immediate, it signals a longer-term shift in how pension efficiency strategies may operate.

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What this means in practice

For business owners, remuneration planning becomes more important. The gap between salary, dividends, and pension contributions is narrowing in terms of tax efficiency, meaning existing extraction strategies should be reviewed rather than assumed to remain optimal. This makes it increasingly important to regularly review remuneration strategies to ensure they remain tax efficient and aligned with both personal and business cash flow needs.

If you want to speak about this in more detail please get touch with us via our "Contact Us" form or on 0141 644 5486.  We look forward to hearing from you!

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