Dividend Tax Is Now 10.75% and 35.75%: What a Taxable Account Costs in 2026/27, and When Bed and ISA Pays Off

Two figures on the GOV.UK dividend page changed on 6 April 2026. The basic-rate dividend tax rate went from 8.75% to 10.75% and the higher rate from 33.75% to 35.75%, a rise first announced in the November 2025 Budget. The additional rate stayed at 39.35% and the dividend allowance stayed at £500, which is why the change slipped past a lot of people with money in a general investment account. It applies to every pound of dividends you receive outside an ISA or pension, including the income your accumulation funds reinvest without ever paying it out to you. Two percentage points sounds trivial until you remember the tax is charged every year the holding sits unwrapped, while the ISA allowance, at £20,000 a year, has not grown to match. If a spreadsheet of yours still says 8.75% or 33.75%, it describes last year. The useful question is not whether the rise hurts but whether it justifies moving anything, and the answer turns on one number: the size of your unrealised gain.

The 2026/27 dividend rates against last year's

These are the figures GOV.UK publishes for the tax year running from 6 April 2026 to 5 April 2027, set beside the rates they replaced.

Your band is found by adding your total dividend income to your other income, which makes dividends the top slice of what you earn. A bonus or a pay rise can therefore push the same dividends from 10.75% into 35.75%, and GOV.UK points out that you may pay tax at more than one rate on a single year's dividends. The first £500 is taxed at 0% in any band, dividends that fall inside an unused Personal Allowance (£12,570 for 2026/27) are tax-free, and nothing is owed on dividends from shares held in an ISA. Distributions from bond funds generally follow the savings rules instead, and under the same set of Budget measures those rates rise by two percentage points across all bands from April 2027.

What £6,000 of dividends costs now

Take a round illustrative figure: £6,000 of dividends in 2026/27, all falling inside one band, with the £500 allowance coming off first so that £5,500 is taxable. At an assumed 4% yield that income needs a taxable portfolio of about £150,000, so read it as a man who has used his ISA allowance for years and still holds a large taxable account.

The increase is £110, but the bill is the bigger number: a higher-rate taxpayer hands over £1,966.25 of the £6,000 and keeps £4,033.75. Is £110 a reason to rebuild a portfolio? On its own, no. The case for acting is the recurring cost, because the same £1,966.25 arrives next year and the year after, and it grows with the dividends.

Bed and ISA: the mechanics and the arithmetic

Bed and ISA means selling a holding in your taxable account and buying it back inside a Stocks and Shares ISA, usually as a single instruction through your platform. The sale counts as a disposal for Capital Gains Tax, the purchase uses part of this year's £20,000 ISA allowance, and from then on the dividends and gains on that holding sit outside tax. The first £3,000 of total gains in a tax year is exempt. Above that, GOV.UK sets the rate at 24% for higher and additional rate taxpayers, while a basic-rate taxpayer pays 18% on gains that fall inside the basic-rate band and 24% on the rest.

Selling and rebuying inside the same taxable account does not achieve any of this. HMRC matches a sale with a repurchase of the same shares by the same person within the following 30 days (its Capital Gains Manual, page CG51560, sets out the same-day and 30-day rules), so the gain or loss is worked out against the repurchase cost and the position is not reset. Aberdeen's adviser technical library lists Bed and ISA among the routes that avoid those matching rules, and platform guides say the same, but confirm the timing and the fees with your own platform before you press the button.

Now the numbers, because this is where people stop checking. Suppose a £20,000 holding carries a £2,500 gain. The gain fits inside the £3,000 exempt amount, so the sale costs no CGT, and if the holding yields an assumed 4%, the £800 of annual dividends it moves into the ISA would have cost £286 at 35.75% or £86 at 10.75%, assuming your £500 allowance is already used up by other income. That is a free move. Now give the same holding a £12,000 gain. After the exempt amount, £9,000 is taxable, and a higher-rate taxpayer owes £2,160 at 24%. Earning that back from £286 a year of saved dividend tax takes about seven and a half years, before counting any shelter on future growth, which in a good decade can matter more than the dividends.

• Holdings with a gain below £3,000, where the sale costs no CGT at all, go first.
• High yielders come next, because every pound of dividend moved out of tax saves the most.
• A large gain can wait. Working through a £12,000 gain at roughly £3,000 a year takes about four tax years, although growth in the meantime adds to what is left.

One cost bites individual UK shares and investment trusts but not unit trusts. Buying existing shares in a UK-incorporated company electronically attracts Stamp Duty Reserve Tax of 0.5%, so rebuying £20,000 of them inside the ISA costs £100, while units in a unit trust or OEIC bought from the fund manager are exempt, according to GOV.UK. Add any dealing charge or bid-offer spread on the sale and the rebuy, and a small saving can disappear.

Accumulation units: tax on income you never see

If a fund is held as accumulation units, you receive no payout. The income is reinvested automatically, and HMRC calls it a notional distribution. HMRC's helpsheet HS284 says that where those distributions are subject to Income Tax, the amount is allowed as additional expenditure on your units, so it raises your base cost and you are not taxed twice when you sell. The practical effect for Bed and ISA is helpful: years of reinvested income shrink the gain on the sale. Funds domiciled overseas have a version of their own under HMRC's offshore funds rules (helpsheet HS265), and the annual tax summary from your platform is where both figures should appear.

Where the next £20,000 should go

Put new money in the ISA before the taxable account, and hold the highest-yielding funds inside the ISA while leaving low-yield growth funds outside it. Income is taxed every year, whereas a gain is taxed only when you sell. The exception is the man whose ISA is already full for the year, who has to use the taxable account for the overflow; a low-yield index fund suits that account far better than a high-yield income fund, which turns every payout into a tax bill.

The 5 October date has just passed

Dividends above your allowance have to reach HMRC every year. GOV.UK's rule for people who do not file Self Assessment is to tell HMRC after 5 April and before 5 October, either by asking for your tax code to be updated or through the helpline, and no report is needed if your dividends stay within the £500 allowance. If dividend income is over £10,000 you need a Self Assessment return, and anyone newly needing one had to register by 5 October 2026. That cut-off, for the 2025/26 year, was three days ago. Those who register late receive a new filing date from HMRC, three months from the date of its letter or email, but the tax itself is still due by 11:59pm on 31 January 2027, with a penalty if it is late. To have a Self Assessment bill collected through your tax code, GOV.UK says the online return must be in by 11:59pm on 30 December 2026. For dividends received in 2026/27, the equivalent window opens after 5 April 2027 and closes on 5 October 2027.

What the 28 October Budget changes for this

The Budget is on Wednesday 28 October, and rates for gains and dividends can move at a Budget. That is a reason to base any Bed and ISA decision on the facts of each holding, meaning its gain, its yield and its dealing costs, rather than on forecasts of what will be announced. The £3,000 exempt amount and the £20,000 ISA allowance belong to the tax year ending 5 April 2027, so there is time to do the work properly.

This week, pull last year's annual tax summary from your platform and add up the cash dividends and any reinvested income. If the total is under £500, none of the above costs you anything. If it is over, price the move on your highest-yielding holding first, with its gain, its dealing costs and, for UK shares, the 0.5% stamp duty on the rebuy.

This is general information on UK tax rules as published on GOV.UK on 8 October 2026, not personal advice, and your own position may differ.