Key takeaways

  • Dividend tax rates (10.75%, 35.75%, 39.35%), the £500 dividend allowance and corporation tax rates (19% to 25%) are unchanged.
  • The BADR lifetime limit halves to £500,000 for disposals from 6 April 2027. A new 10% Founders' Relief helps a small number of high-growth companies.
  • Rules on taking profits out through buybacks and holding company structures are reformed from April 2028.
  • The main rate writing down allowance falls to 12% from April 2027 and company cars must be payrolled from April 2027.
  • Interest a director receives, for example on a loan to their own company, is savings income taxed at up to 44% or 49% from April 2027.

For directors of owner-managed companies, Budget 2026 leaves the everyday numbers alone. Salary, dividend and corporation tax rates are unchanged, so the basic profit extraction calculation for 2027-28 looks the same as for 2026-27. The changes come at the edges: selling or restructuring the company, investing in plant, providing company cars, and paying HMRC. Here is what to raise with director clients.

What is not changing

The Chancellor said there would be “no tax rises on wages or dividends”. For 2027-28:

  • dividend rates stay at 10.75% (ordinary), 35.75% (upper) and 39.35% (additional), with a £500 dividend allowance
  • corporation tax stays at 19% up to £50,000 of profit and 25% above £250,000, with marginal relief between
  • employer National Insurance stays at 15% above the secondary threshold of £96 a week, and the Employment Allowance at £10,500
  • the personal allowance is frozen at £12,570 and the basic rate band at £37,700

The usual salary and dividend mix therefore carries over. Use our salary versus dividends calculator and optimal director’s salary calculator to check individual cases.

Selling or exiting the company

  • Business Asset Disposal Relief. The lifetime limit falls from £1 million to £500,000 for disposals from 6 April 2027. The 18% rate is unchanged. On a £1 million gain, missing the deadline costs a higher rate taxpayer up to £30,000. See BADR limit halved.
  • Founders’ Relief. A 10% rate on up to £10 million of gains from 6 April 2027 for founders who held 25% at the start and whose company meets turnover, headcount and growth or R&D tests. Most owner-managed companies will not qualify. See Founders’ Relief explained.
  • Distributions reform. From April 2028, value returned on buybacks or capital reductions after a share reorganisation will be limited to the capital originally subscribed, purchase of own shares relief gets mechanical tests, and the transactions in securities rules are replaced. Ordinary dividends and genuine sales are not affected. See company distributions reform.

Running the company

  • Capital allowances. The main rate first-year allowance rises to 50% for spending from 1 January 2027 and the main rate writing down allowance falls to 12% from 1 April 2027. Full expensing and the £1 million AIA are unchanged. See capital allowances.
  • Company cars and benefits. Company cars, fuel, vans and medical cover must be payrolled from 6 April 2027, with most other benefits from April 2028. Company car percentages for 2030-31 are set at 10% for zero-emission cars. See payrolling benefits in kind.
  • Mileage. Directors who use their own car can be paid 55p a mile for the first 10,000 business miles, and 35p above that from April 2027. See mileage rates.
  • Share schemes. The CSOP limit doubles to £120,000 and CSOP becomes EMI2 from April 2027. See EMI and CSOP changes.
  • R&D. No claim notification form is needed for R&D claims made from 1 April 2027. See Corporation Tax in Budget 2026.

Your own tax as a director

  • Savings income. From 6 April 2027 savings income is taxed at 24%, 44% and 49%. That includes interest a director receives on a loan to their own company, so the case for charging interest on a director’s loan account needs revisiting.
  • Property income. Directors who let property personally pay 24%, 44% or 49% on rental profit from April 2027. See Budget 2026 for landlords.
  • Trading allowance. The trading allowance rises to £3,000, but it cannot be used against income from a company you or a connected person controls.

Dealing with HMRC

  • Payments to participators. The proposed new reporting of payments between close companies and their shareholders will not go ahead at this time. HMRC says many small companies struggle with existing obligations, so expect more guidance on director’s loan accounts.
  • Direct Debit for VAT and PAYE. From April 2029 companies must have a Direct Debit in place, which HMRC will use to collect any VAT or PAYE return liability unpaid at the due date. See Direct Debit for VAT and PAYE.
  • Small company debts. From July 2029 HMRC can take regular deductions from company bank accounts for debts up to £10,000 where the company repeatedly ignores HMRC. Companies are in the first phase, before individuals. See direct recovery of tax debts.
  • Correcting errors. From 1 April 2028 a company that discovers an error in a return must take reasonable steps to correct it, or it will be treated as deliberate. See the new duty to correct errors.
  • Director bans. Directors convicted of breaching an HMRC security requirement can be disqualified for up to five years, for offences from 1 April 2027. See HMRC compliance changes.
  • E-invoicing. VAT-registered companies must issue and receive VAT invoices as e-invoices from 1 April 2029. See VAT e-invoicing.

Action points for the practice

  1. List director clients with possible exits before 2029 and model the BADR cut against a pre-6 April 2027 completion.
  2. Flag any planned holding company reorganisations, buybacks or capital reductions for review before April 2028.
  3. Review company car and benefits arrangements ahead of payrolling in April 2027.
  4. Revisit interest on director’s loan accounts in light of the new savings rates.
  5. Check that VAT and PAYE payment processes will work with an automatic Direct Debit backstop from 2029.

Our guides to Self Assessment for directors and dividend income tax cover the current rules.

Frequently asked questions

Are dividend tax rates going up after Budget 2026?

No. The dividend rates stay at 10.75%, 35.75% and 39.35% in 2027-28, and the dividend allowance stays at £500.

Is corporation tax changing for small companies?

No. The small profits rate stays at 19% and the main rate at 25%, with marginal relief between £50,000 and £250,000.

How does Budget 2026 affect selling my company?

The BADR lifetime limit falls to £500,000 for disposals from 6 April 2027, so gains above that are taxed at up to 24% instead of 18%. A small number of high-growth companies may qualify for the new 10% Founders’ Relief.

Will interest on my director’s loan to the company be taxed more?

Interest you receive is savings income, so from 6 April 2027 it is taxed at 24%, 44% or 49% depending on your band, after any personal savings allowance or starting rate for savings.

Sources

Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance on 28 October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.