If you own a small business, a company pension portfolio, or a few shares in an ISA that has gone over the allowance, today is the day your tax bill quietly went up. As of April 2026, the basic rate and higher rate of tax on dividends have each risen by two percentage points. The Treasury estimates this will raise around £5.2 billion between now and 2030/31. That money is coming out of the accounts of savers, retirees, and the owners of the small limited companies that do most of the actual work in this country.
A Stealth Raid, Delivered On Time
This isn't a tax rise on the super-rich, regardless of what the Chancellor implies at the dispatch box. High earners with sophisticated tax advisers will restructure their affairs. They will shift income into capital gains, trusts, or jurisdictions outside HMRC's reach. The people who actually pay the higher dividend rates are ordinary investors — people who own their own limited companies, contractors, pensioners living off income, and savers with modest portfolios they built up over decades of hard work.
These are the same people who were told during Covid they were too "risky" to qualify for government support. They are the same people who have been squeezed by corporation tax rising to 25 per cent, by the abolition of the Entrepreneurs' Relief in all but name, by dividend allowance cuts that have brought thousands of small savers into the tax net for the first time. This is not a one-off. It is a pattern.
The Capital Allowance Cut Is Worse Than It Looks
At the same time as the dividend tax rise, the government has cut the main Writing Down Allowance from 18 per cent to 14 per cent. In plain English: if a business buys a new machine, it will take longer to get tax relief against it. The government's counter is a new 40 per cent first-year allowance for main-rate assets. It looks generous. In practice most genuinely productive capital investment in small and medium-sized businesses doesn't fit neatly into the 40 per cent bucket, and the slower WDA bites them harder over time.
This is tax policy written by people who have never run a business. Small firms are making investment decisions now, not over the 2030 forecast horizon. When you reduce how quickly they can recoup the cost of new equipment, you reduce the amount of equipment they buy. That flows through into lower productivity, lower wages, and slower growth — exactly the opposite of what a Chancellor boasting about "investment" should want.
Inheritance Tax and the Business Relief Cap
It gets worse. From April, Business and Agricultural Property Relief from inheritance tax are being capped at £1 million (with a partially restored higher band following lobbying), with a new 20 per cent rate on assets above that. This sounds progressive in a slogan. In reality it falls on the owners of working farms, working shops, working family businesses. It is the single fastest way to force the break-up of family enterprises in a generation.
Labour wanted you to pay more so they could spend more. That's fine — that's what Labour governments do. But don't pretend it's a raid on the rich. The rich have already gone. The people still here, the people holding the parcel when the music stops, are savers and small business owners in places like Preston East. They were promised no tax rises for working people. It was a lie.
What Reform UK Would Do
Reform UK would reverse the dividend rate increase. We would restore a competitive capital allowance regime and stop punishing firms for investing. We would raise the business property relief cap and stop breaking up family businesses at the point of inheritance. We would simplify the tax code rather than drop another layer of stealth charges on top of it every budget.
Tax every year, and you will get less growth every year. It isn't complicated. Labour will eventually learn this lesson — the question is how much damage they do before they do.