The upcoming tax year starting in April will usher in significant changes that individuals should take note of. Unlike the regular calendar year, the tax year spans from April 6 to the following April 5. During this period, personal tax allowances, ISA limits, and pension allowances reset.
New PAYE tax codes for employees will also be introduced. Here are some key changes set to take effect from April 6:
Sole traders and landlords earning over £50,000 annually will need to maintain digital records and submit tax updates quarterly starting in April 2026 under HMRC’s Making Tax Digital initiative. This will require compatible software to store income, expenses, VAT (if applicable), and tax adjustments.
In April 2026, alterations to agricultural and business property reliefs for Inheritance Tax purposes will be implemented. A new cap of £2.5 million will be set before Inheritance Tax applies, with only 50% tax relief granted on assets exceeding this threshold, up from the previous £1 million cap. The standard Inheritance Tax rate remains at 40%.
Following the Budget announcement, the Dividend Tax rate will increase from 8.75% to 10.75% for basic rate taxpayers and from 33.75% to 35.75% for higher rate taxpayers. A dividend refers to the distribution of company profits to shareholders.
Starting April 2026, individuals working from home will no longer be eligible to claim tax relief from HMRC for additional household expenses like gas and electricity. The UK’s work-from-home allowance is currently set at a flat rate of £6 per week, and tax relief can only be claimed if there is no office to go to, not for choosing to work remotely.
From April 2026, the Capital Gains Tax rate for Business Asset Disposal Relief and Investors’ Relief will rise from 14% to 18%. Despite the increase, the £1 million lifetime limit for these reliefs will remain, resulting in higher taxes for entrepreneurs and investors on qualifying business sales.