Top Tax Changes For 2026/27

The UK tax changes for 2026/27 are less dramatic than in some years, but several will affect how much people actually pay, particularly business owners, company directors, landlords, and anyone with significant assets. 

Dividend tax has gone up, a key capital gains relief has increased, Making Tax Digital is now live, and inheritance tax relief for businesses and farms has been capped for the first time.

Here’s what’s changed and what it means for you. 

Income Tax Thresholds 2026/27: The Freeze Continues

For 2026/27, the personal allowance stays at £12,570, and the threshold for higher and additional rate tax is unchanged.  

As wages increase with inflation, more people find themselves pushed into higher tax bands without any actual increase in purchasing power. This freeze is locked in until at least April 2031, making it a tax rise in all but name. 

National Insurance is similarly unchanged for 2026/27. Employees continue to pay 8% on earnings between £12,570 and £50,270, and employers pay 15% above the £5,000 secondary threshold, both frozen until at least 2030/31.

Dividend Tax Rates 2026 

From 6 April 2026, basic rate taxpayers pay 10.75% on dividend income (up from 8.75%), and higher rate taxpayers pay 35.75% (up from 33.75%). The additional rate stays at 39.35%. The £500 dividend allowance is unchanged.

This matters most to company directors and shareholders who take income through dividends rather than salary. The 2% increase may not sound significant, but on meaningful dividend income, it adds up quickly. If you draw £30,000 in dividends as a higher-rate taxpayer, you’ll pay several hundred pounds more than last year.

It’s worth reviewing how you’re taking income from your company if you haven’t already.

Capital Gains Tax Changes 2026

The main CGT rates haven’t moved: 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. The annual exempt amount remains at £3,000.

The change that does matter is for business owners selling their company. The CGT rate under Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) has risen from 14% to 18% from 6 April 2026. The same applies to Investors’ Relief.

On a qualifying gain of £250,000, that’s an extra £10,000 in tax. If you’re planning a business exit in the near term, it’s worth getting advice on timing and structure sooner rather than later.

Making Tax Digital for Income Tax: Who Needs to Comply From April 2026

April 2026 marks the start of Making Tax Digital (MTD) for Income Tax. Sole traders and landlords with gross income over £50,000 based on their 2024/25 tax return now have to keep digital records and submit quarterly updates to HMRC, in addition to an annual return.

Penalties for late submission won’t kick in during 2026/27, but the requirement itself is live. If you’re in scope and haven’t already moved to compatible software, now is the time.

The threshold drops to £30,000 in April 2027, and to £20,000 in April 2028, so even those not yet caught by MTD will need to plan.

Working From Home Tax Relief 2026

Employees who work from home and aren’t reimbursed by their employer can no longer claim tax relief for additional household costs. 

Previously, the standard flat-rate claim was £6 per week, which is worth around £62 a year for basic rate taxpayers and £124 for higher rate taxpayers.

Around 300,000 people were still claiming this. If your employer doesn’t cover your home-working costs directly, that option is now gone.

Inheritance Tax Changes 2026: Business and Agricultural Property Relief Now Capped at £2.5m

Inheritance tax is the most significant change of the year for business owners and farmers.

Until now, Business Property Relief and Agricultural Property Relief could reduce the taxable value of qualifying assets by 100%, with no upper limit. From 6 April 2026, the 100% rate only applies to the first £2.5 million of combined qualifying assets per person. Above that, relief drops to 50%.

The nil-rate band itself remains frozen at £325,000, meaning rising asset values are steadily drawing more estates into scope. If your estate includes a trading business, farm, or significant shareholding in an AIM-listed company (where relief is now also limited to 50%), an estate planning review is worth prioritising.

Key UK Tax Changes Coming in April 2027

A few significant changes are already confirmed for next year:

• Pensions and IHT: Unused pension funds will fall within the scope of inheritance tax from April 2027 for the first time. This changes the picture significantly for estate planning, especially if you’ve been treating your pension as a tax-efficient way to pass wealth on.
• Savings and rental income tax rates: New rates will apply from April 2027, expected to sit 2% above the current main income tax rates, bringing basic rate savings and property income tax to 22%, higher rate to 42%, and additional rate to 47%.
• ISA changes: The overall ISA limit stays at £20,000 for now, but from April 2027, cash ISA contributions will be capped at £12,000 for those under 65.

Frequently Asked Questions

What tax changes came into effect in the UK in April 2026?

From 6 April 2026, several UK tax changes came into effect: 

• Dividend tax rates increased by 2% for basic rate taxpayers (now 10.75%) and higher rate taxpayers (now 35.75%). 
• The CGT rate under Business Asset Disposal Relief rose from 14% to 18%. 
• Making Tax Digital for Income Tax became mandatory for sole traders and landlords with gross income over £50,000. 
• The flat-rate working from home tax relief of £6 per week was abolished for employees not reimbursed by their employer.
• Business Property Relief and Agricultural Property Relief were capped. The 100% rate now only applies to the first £2.5 million of combined qualifying assets per person, with 50% relief above that threshold.

If you’re unsure how any of these changes affect your tax position, speak to our team for straightforward, personal advice.

Who needs to register for Making Tax Digital for Income Tax and when?

Making Tax Digital for Income Tax is being rolled out in phases based on gross income. 

• From April 2026, it applies to sole traders and landlords whose gross income from self-employment and/or property exceeded £50,000 in the 2024/25 tax year. 
• From April 2027, the threshold drops to £30,000 (based on the 2025/26 return). 
• From April 2028, it will extend to those earning over £20,000. 

Those in scope must keep digital records and submit quarterly updates to HMRC using compatible software, in addition to an annual return. Late submission penalties will not apply in the first year (2026/27) but will come into force from April 2027.

If you think you may fall within scope, we can help you get set up with the right software and processes before the deadlines arrive. Get in touch to find out more.

Why has inheritance tax relief changed for business owners and farmers in 2026?

The government changed Business Property Relief and Agricultural Property Relief as part of a broader effort to raise tax revenue, arguing that uncapped reliefs were disproportionately benefiting larger estates. 

The original proposal, announced at Autumn Budget 2024, was a £1 million cap, but following significant pushback from farming and business communities, this was increased to £2.5 million per person in December 2025.

Previously, qualifying business and agricultural assets attracted 100% relief from inheritance tax with no upper limit, meaning very large estates could pass on substantial wealth entirely free of IHT.

From 6 April 2026, the 100% rate is capped at £2.5 million of combined qualifying assets per person. Assets above that threshold receive 50% relief, resulting in an effective IHT rate of 20% on the excess. Any unused allowance is transferable between spouses and civil partners, giving couples a combined allowance of up to £5 million. When stacked with the standard nil-rate band of £325,000 per person, a married couple or civil partners can pass on up to £5.65 million tax-free between them. The IHT rate itself remains 40%.

If you own a business or agricultural land and want to understand how these changes affect your estate planning, our team can help you review your position and explore what options are available to you. Contact Haggards Crowther for a conversation.