2026/27 Tax Year – Key Changes to Be Aware Of
The new tax year began on 6 April 2026, bringing a number of tax updates for individuals and businesses. While many rates and thresholds remain frozen, there are several important changes that could affect tax planning and reporting obligations over the coming years.
Below is a summary of some of the key points for the 2026/27 tax year.
Income Tax
Income tax thresholds and personal allowances remain frozen in England, Wales and Northern Ireland until April 2031.
The personal allowance remains at £12,570.
For Scottish taxpayers, some thresholds have increased for the 2026/27 tax year:
- Basic rate threshold (20%) increased to £16,538
- Intermediate rate threshold (21%) increased to £29,527
Dividend Tax
Dividend tax rates have increased by 2% for basic and higher rate taxpayers.
The rates are now:
- 10.75% for basic rate taxpayers
- 35.75% for higher rate taxpayers
- 39.35% for additional rate taxpayers
The dividend allowance remains at £500.
Business Asset Disposal Relief (BADR)
The rate of Capital Gains Tax payable under Business Asset Disposal Relief has increased to 18% from 6 April 2026.
The lifetime limit for qualifying gains remains at £1 million.
Making Tax Digital (MTD)
Making Tax Digital for Income Tax has now started to apply for some taxpayers.
From April 2026, self-employed individuals and landlords with qualifying income over £50,000 will be required to:
- Keep digital records
- Use compatible software
- Submit quarterly updates to HMRC
The threshold is expected to reduce to £30,000 from April 2027.
National Insurance for Overseas Workers
Changes have been introduced for individuals wanting to make voluntary National Insurance contributions while working abroad.
From April 2026, most individuals will need to pay Class 3 contributions instead of Class 2 contributions, subject to eligibility requirements.
Working From Home Relief
The temporary tax relief available for employees working from home has now ended.
Employees can no longer claim the flat rate household expense deduction previously available where home working was required by their employer.
Looking Ahead – Proposed Future Changes
The government has also announced a number of proposed changes expected from April 2027, including:
- Potential inheritance tax changes affecting unused pension funds
- Further expansion of Making Tax Digital requirements
As with all future tax announcements, these proposals may still be subject to change before implementation.
If you would like advice on how any of these changes may affect you or your business, please contact the team at KP Simpson.
