The upcoming tax year will bring significant changes that individuals should take note of as it starts from April 6 and ends on April 5 the following year. During this period, personal tax allowances, ISA limits, and pension allowances reset.
Starting next month, employees can expect new PAYE tax codes. Moreover, from April 2026, sole traders and landlords earning over £50,000 annually will need to maintain digital records and provide tax updates quarterly as part of HMRC’s Making Tax Digital initiative. This requires using compatible software to store income, expenses, VAT information, and tax adjustments.
Inheritance Tax rules will also see adjustments in April 2026, with a new £2.5 million cap before tax becomes due, applying a 50% tax relief to assets exceeding this limit, up from the previous £1 million threshold. The standard Inheritance Tax rate remains at 40%.
Furthermore, the Dividend Tax rate is set to increase from 8.75% to 10.75% for basic rate taxpayers and from 33.75% to 35.75% for higher rate taxpayers following recent Budget announcements. This tax is levied on profits distributed by companies to their shareholders.
Another change coming in April 2026 is the discontinuation of tax relief claims for extra household costs, like gas and electricity, for those working from home. The UK’s work from home allowance, currently at £6 per week, will no longer be applicable to individuals who choose to work remotely and do not have a physical office to go to.
Moreover, the Capital Gains Tax rate for Business Asset Disposal Relief and Investors’ Relief is increasing from 14% to 18%, affecting entrepreneurs and investors who will pay more tax on qualifying business sales. The lifetime limit for these reliefs remains at £1 million.
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