Tax experts have issued a warning as there are just three weeks remaining before a major tax change comes into force that could leave thousands of households paying an average of £600 more each year.
From April 6, 2026, dividend tax rates will increase under changes overseen by HM Revenue and Customs (HMRC), affecting thousands of Britons who receive income from dividends.
Tax compliance firm Qdos said those likely to be affected should review their finances before the new tax year begins.
The changes are expected to have the greatest impact on freelancers, contractors and small business owners who often pay themselves through a combination of salary and dividends.
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Under the new rules, the basic rate of dividend tax will rise from 8.75 per cent to 10.75 per cent.
The higher rate will increase from 33.75 per cent to 35.75 per cent.
Additional rates will remain unchanged at 39.35 per cent.
These adjustments represent a two percentage point increase across both the basic and higher dividend tax bands.
Dividend tax rates will increase under changes overseen by HMRC
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Many directors of limited companies structure their income using a mix of salary and dividends, which is a common and compliant approach to managing earnings.
However, the higher tax rates mean individuals using this structure may see a noticeable increase in their tax bills.
According to Qdos, someone withdrawing around £50,000 a year from their business could pay roughly £600 more in tax annually once the new rates take effect.
For individuals taking about £100,000 from their company, the increase could reach approximately £1,400 a year due to the higher rate changes.
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UK tax burden as a percentage of GDP | GB NewsSeb Maley, chief executive of Qdos, said: "With just weeks to go until the new rates take effect, now's the time for company directors to review their remuneration strategy and potentially make use of the existing thresholds before they rise next month.
"Many directors of small limited companies structure their income through a combination of salary and dividends, which is a compliant way to operate."
Mr Maley continued: "For someone taking just over £50,000 a year from their business, the increase in the basic dividend tax rate from 8.75 per cent to 10.75 per cent could mean paying roughly £600 more in tax each year."
"This nearly triples for someone paying themselves around £100,000 a year, to around £1,400 as a result of the higher rate changes."
Despite the changes, the majority of taxpayers are not expected to be affected
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He also warned that tax authorities are likely to monitor compliance closely once the revised rates come into force.
The Government has said the changes are intended to reduce differences between the taxes paid by employees and those who receive income from assets such as dividends.
Unlike people in traditional employment or self-employment, individuals receiving dividend income do not pay National Insurance on those earnings.
Officials argue the increases help narrow that gap.
More than 90 per cent of UK taxpayers do not receive taxable dividend income, meaning most households will see no change to their tax bills when the new rates begin on April 6.