Dividends or PAYE? How tax changes could affect your video game company’s income

There are important changes to dividend tax rates coming up that could affect your games business and how you take your income.

Dividend tax rates are going up

Video game companies typically pay owners or senior team members through a mix of salary and dividend payments as the most efficient way to draw income. However, that balance is likely to be affected by incoming changes to tax rules.

From 6 April 2026, dividend tax rates are going up by 2% for basic and higher rate taxpayers. Additional rate taxpayers will continue to be taxed at 39.35% on dividend receipts. These changes mean that it is essential to check whether dividends are the most efficient way for you to take income from your business, as delaying payments to the next tax year could mean paying more tax.

Timing is only part of the issue. You should also ensure that you’re making the most of the tax reliefs your game business can qualify for, such as:

• Video Games Expenditure Credit (VGEC), which offers a 34% credit on qualifying development costs for eligible UK video game development projects.
• R&D Tax Relief, which continues to support innovative projects, with updated rules, rates and upcoming improvements aimed at helping SMEs access relief more easily.

Claiming VGEC and R&D can make a big difference to your overall tax position. So, it makes sense to make sure you’re gaining the maximum value from those reliefs at the same time that you review your dividend strategy to get the best outcome for you and your business.

How we can help

Do you want advice about the forthcoming changes? Our team at Moore Kingston Smith would be happy to talk to you about:

• How the dividend changes could affect your financial position;
• How VGEC and R&D fit into your business’s planning;
• The most tax efficient way to take income before and after 6 April 2026.

If you’d like to arrange a call with our team, contact Rob Kersse and we will find a time that works for you.