Date posted: 26th Mar 2026
April 2026 marks the start of a new tax year, with a raft of changes across income tax, capital gains tax (CGT), inheritance tax (IHT), corporation tax and National Insurance contributions (NICs).
For many, the headline will be higher effective tax on investment and business gains, tighter inheritance tax reliefs, and more stringent penalties for non-compliance.
Income tax: higher tax take without headline rate rises
Frozen thresholds and “fiscal drag”
- The personal allowance remains at £12,570 and the basic rate band at £37,700, keeping the higher-rate threshold at £50,270.
- With wages rising, more earners are being pulled into higher and additional rate bands, increasing overall tax without any change in the main rates.
Dividend and investment income changes
- Dividend tax rates increase by 2 percentage points from 6 April 2026: basic rate from 8.75% to 10.75%, higher rate from 33.75% to 35.75%, with the additional rate holding at 39.35%.
- The tax-free dividend allowance remains just £500, so more modest portfolios will now suffer a tax charge where they were previously covered by the allowance.
- Looking ahead to April 2027, 2 percentage points will be added to all tax rates that apply to savings income and rental income too.
Making Tax Digital (MTD) for Income Tax
- From 6 April 2026, MTD for Income Tax becomes mandatory for self-employed individuals and landlords with gross income over £50,000, requiring digital record-keeping and quarterly submissions instead of a single annual return.
- The income threshold is due to fall to £30,000 from April 2027 (and £20,000 from April 2028), bringing many smaller landlords and sole traders into the regime.
Venture Capital Trust investments
- Upfront income tax relief on new VCT investments will reduce to 20% (currently 30%) for subscriptions made on or after 6 April 2026.
Capital gains tax: higher rates on business exits
- The CGT rate for gains qualifying for Business Asset Disposal Relief (BADR) and Investors’ Relief increases from 14% to 18% for disposals on or after 6 April 2026.
- The lifetime limit for BADR remains £1 million, but the tax cost of using that allowance has risen sharply – a £1 million qualifying gain that once attracted £100,000 of tax (at 10%) will now be taxed at £180,000.
Capital gains tax: relief to be claimed
- If you incorporate your business (or indeed your property portfolio) and wish to benefit from incorporation relief, it is expected you will need to claim the relief from 6 April 2026, rather than this being an automatic relief.
Inheritance tax: caps on business and agricultural relief
- From 6 April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) are capped at a combined £2.5 million per individual for 100% relief.
- Qualifying agricultural and business assets above this level receive only 50% relief, giving an effective IHT rate of 20% on the excess.
The allowance is transferable between spouses and civil partners, so a couple could still shelter up to £5 million of qualifying assets at 100% relief if they plan effectively.
There are also tightening rules around AIM-listed shares.
Corporation tax: higher penalties for late filing
While the main corporation tax rate changes occurred earlier in the decade, April 2026 brings a tougher penalty regime for companies that file late.
- Fixed late filing penalties for Corporation Tax returns with filing dates on or after 1 April 2026 increase, with the standard fixed penalties broadly doubling compared with the previous regime.
- Higher fixed penalties apply where a company files late for several consecutive periods, reflecting HMRC’s drive to discourage habitual non-compliance.
Combined with higher late-payment interest rates, the cost of missing filing and payment deadlines will be significantly greater, making strong compliance processes more important than ever.
National Insurance: rate and rule tweaks
- NIC thresholds remain aligned with income tax bands, contributing further to fiscal drag as more earnings fall within the charge.
- The Class 2 NIC rate for the self-employed increases (for example, from £3.50 to £3.65 per week), and the voluntary Class 3 rate also rises, making it slightly more expensive to fill gaps in contribution records.
A notable change is that voluntary Class 2 NICs will no longer generally be available to cover periods spent working or living abroad, with tighter criteria applied to Class 3 in these situations.
Enterprise Management Incentive Scheme
From 6 April 2026, the EMI regime is being expanded so more, larger growth companies can qualify, and options can generally run for longer while still benefiting from EMI tax treatment.
- Company share options limit doubled from £3 million to £6 million of unexercised EMI options.
- Gross assets limit increased from £30 million to £120 million for qualifying companies.
- Employee headcount limit increased from fewer than 250 to fewer than 500 employees.
- Maximum EMI option exercise/holding period extended from 10 years to 15 years for most companies.
- The 15‑year limit can also be applied to existing unexercised EMI options, provided the documentation is amended appropriately without breaching EMI rules.
What should clients do now?
For individuals and businesses, the 2026/27 year is about getting ahead of higher effective tax rates and stricter compliance:
- Review remuneration and dividend strategies in light of higher dividend and investment income rates and frozen thresholds.
- For business owners, revisit exit plans and succession strategies, particularly where BADR and IHT relief caps could significantly increase the tax cost of passing on or selling the business.
- Ensure bookkeeping systems, software and internal processes are ready for MTD for Income Tax and the tougher corporation tax penalty regime.
As ever, we are here to help.
