If you run your property business through a limited company, the profits don’t automatically become your personal income.
To use those profits personally, you’ll need to extract the money from the company. One of the most common ways to do this is by taking dividends.
Dividends can often be a tax-efficient way to withdraw profits, but the timing can make a difference — especially with dividend tax rates set to rise from April 2026.
Let’s look at what property company owners should consider.
Can You Take Dividends from Your Property Company?
Before paying a dividend, your company must have sufficient retained profits.
Dividends can only be paid from profits after corporation tax, not from turnover or expected future income.
There’s another important rule too.
If more than one shareholder owns the same class of shares, dividends must usually be paid in proportion to their shareholdings.
Some companies use an alphabet share structure, where each shareholder has a different class of shares. This can allow dividends to be tailored to each shareholder’s circumstances.
Have You Used Your Dividend Allowance?
Every taxpayer has a dividend allowance, regardless of their income level.
For the 2025/26 tax year, the allowance is £500, and this will remain the same for 2026/27.
Dividends within this allowance are not subject to personal tax.
However, the allowance acts as a 0% tax band, which means it still uses part of your income tax band.
If you haven’t yet used your 2025/26 dividend allowance, it may be worth taking a dividend before the tax year ends.
What Tax Do You Pay on Dividends?
Once the dividend allowance (and any available personal allowance) has been used, dividends are taxed according to the tax band they fall into.
For 2025/26, the rates are:
- 8.75% for dividends within the basic rate band
- 33.75% for dividends within the higher rate band
- 39.35% for dividends within the additional rate band
Dividends are treated as the top slice of income, meaning they sit on top of your other earnings.
Dividend Tax Rates Are Increasing
From 6 April 2026, the dividend tax rates will increase:
- The basic rate rises from 8.75% to 10.75%
- The higher rate rises from 33.75% to 35.75%
- The additional rate remains unchanged at 39.35%
This means dividends taken after April 2026 could be taxed at a higher rate.
Should You Take a Dividend Before the Tax Rise?
If your property company has sufficient retained profits, you may want to consider taking a dividend before 6 April 2026.
Doing so could potentially reduce the tax payable.
However, timing needs to be considered carefully.
For example, if taking an additional dividend in 2025/26 pushes you into the higher rate band, it may actually result in more tax than taking it in 2026/27.
This is why dividend planning should always be reviewed alongside your overall income position.
Final Thoughts
Dividends can be a useful way to extract profits from a property company, but the tax implications can vary depending on timing, tax bands and available allowances.
With dividend tax rates increasing from April 2026, now could be a good time to review your profit extraction strategy.
Have you checked whether taking dividends before the tax year ends could reduce your tax bill?
Need Help Planning Dividends from Your Property Company?
If you run a property company and want to make sure you’re extracting profits in the most tax-efficient way, we’d be happy to help.
At Jon Davies Accountants, we work with business owners and property investors across the UK to help them plan their finances effectively.
Get in touch with Jon or the team today if you’d like help reviewing your dividend strategy before the next tax year begins.
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Any questions?
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