The new UK tax year starting 6 April 2026 introduces a number of important personal tax changes. While there are no major headline rate increases, several updates will quietly increase the overall tax burden.
This guide breaks down what’s changing and what it means for you.
1. Income Tax Thresholds Remain Frozen
The UK government continues to freeze income tax thresholds:
- Personal Allowance: £12,570
- Basic Rate Band: £12,571 – £50,270
- Higher Rate: £50,271 – £125,140
Why this matters
As incomes rise due to inflation, more taxpayers are pushed into higher bands — known as fiscal drag.
Result: You may pay more tax even if your income only increases slightly.
2. Dividend Tax Rates Are Increasing
From April 2026, dividend tax rates will rise by 2%:
- Basic rate: 10.75%
- Higher rate: 35.75%
- Additional rate: 39.35%
- Dividend allowance remains at: £500
Who is affected?
- Company directors
- Shareholders
- Small business owners
This is one of the most significant changes and will directly increase tax on profit extraction.
3. Capital Gains Tax (CGT) – Key Update for Business Owners
Standard CGT rates remain:
- 18% (basic rate taxpayers)
- 24% (higher rate taxpayers)
However:
Business Asset Disposal Relief (BADR) increases to 18% from April 2026
Impact
- Selling a business becomes more expensive
- Entrepreneurs will pay more tax on exit
4. Lower Tax-Free Allowances Continue
Key allowances remain reduced:
- Dividend Allowance: £500
- Capital Gains Tax Allowance: £3,000
Impact
More of your investment income becomes taxable, even at lower levels.
5. Making Tax Digital (MTD) for Income Tax Begins
From 6 April 2026:
Applies to self-employed individuals & landlords earning over £50,000
Requires:
- Digital record-keeping
- Quarterly submissions
- Use of compatible software
Important
This is not a tax increase, but it significantly increases compliance requirements.
6. Investment Landscape Becoming Less Tax-Efficient
The overall direction of UK tax policy is clear:
- Higher dividend taxation
- Reduced allowances
- Increased tax on business disposals
Over time, investment and passive income are being taxed more heavily.
7. Other Changes to Be Aware Of
- Work-from-home tax relief is no longer widely available
- Benefit-in-Kind (BIK) rates (e.g., electric vehicles) are gradually increasing
- Travel-related taxes like Air Passenger Duty are rising
What Should You Do Now?
Review Your Income Strategy
If you run a company:
- Reassess salary vs dividends
- Consider timing dividend payments
Use Tax-Efficient Wrappers
- ISAs
- Pension contributions
Plan Business Sales Early
- BADR changes mean higher tax if you delay
Get Ready for MTD
- Start using accounting software now
- Avoid last-minute compliance issues
Final Thoughts
April 2026 may not look dramatic on the surface, but the reality is different.
With:
- Frozen thresholds
- Higher dividend tax
- Reduced allowances
Most taxpayers will experience a gradual increase in their overall tax burden. Planning ahead is essential to stay efficient and compliant. At Pro taxman, we support individuals, directors, and investors with proactive tax planning and compliance. Get in touch today to prepare for the 2026/27 tax year with confidence.