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The new tax year changes began on 6 April 2026, and the most important number in it is one that did not move. The personal allowance is still £12,570, exactly where it has sat since April 2021. After the Autumn 2025 Budget, it stays there until April 2031.
That sounds like good news. It is not. Wages and pensions keep rising while the thresholds stand still, so every year a little more of your income gets taxed, and some people cross into a higher band without earning a penny more in real terms. The official term is fiscal drag. The plain version is a tax rise that nobody has to announce.
Below are the five shifts that matter most for the 2026/27 tax year, what they cost in real money, and what you can do before the year runs out.
1. Income tax the rates held the freeze bites
The headline rates for England, Wales and Northern Ireland are unchanged. You pay 20% on taxable income up to £37,700, 40% above the higher rate threshold of £50,270, and 45% above £125,140. The personal allowance still tapers away once income passes £100,000, falling by £1 for every £2 earned, and it disappears entirely at £125,140.
None of those figures changed for 2026/27. That is the point. If the personal allowance had tracked inflation since 2021, it would sit several thousand pounds higher, and you would keep more of your earnings. Instead the freeze quietly pulls more people into tax and more earners into the 40% band each year. Pay rises that only match inflation can still raise your tax bill.
Pensioners feel this sharply now. The full new State Pension rises to £241.30 a week in 2026/27, which works out at roughly £12,547 a year. That is within a whisker of the £12,570 allowance. A pensioner with even a small private pension or part-time income on top can owe income tax for the first time in their life.
For the official rates and bands, see GOV.UK income tax rates.
2. Dividend tax a quiet rise that hits company directors hardest
If you run a limited company and pay yourself mostly in dividends, your tax bill went up on 6 April 2026, even though your income did not.
The dividend allowance stays at £500. The rates above it rose by two percentage points for two of the three bands:
| Band | 2025/26 rate | 2026/27 rate |
|---|---|---|
| Basic rate | 8.75% | 10.75% |
| Higher rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% (unchanged) |
A worked example shows the bite. Take £1,000 of dividends above the allowance for a basic-rate taxpayer. Last year the tax was £87.50. This year it is £107.50 on the same money.
Here is the part that catches people out. Plenty of directors set their salary and dividend split years ago, when the basic rate was 8.75%. That split is no longer optimal. With dividend rates climbing and salary still subject to National Insurance at 8% above the threshold, the most tax-efficient mix has shifted, and the gap between a structure that was reviewed last month and one that was not can run into four figures a year. If you have not had your remuneration looked at since the Budget, you are very likely leaving money with HMRC. Our guide on salary versus dividends for limited company directors walks through the maths.
3. Making Tax Digital for Income Tax goes live
This is the single biggest practical change of the year, and the one most sole traders and landlords are unprepared for.
From April 2026, anyone with qualifying income above £50,000 from self-employment, rental property, or both combined, must keep digital records and send HMRC a quarterly update through approved software. The old routine of one annual Self Assessment in January is gone for this group. You now report four times a year plus a final declaration.
HMRC has said it will not charge late-submission penalties during the first year while everyone adjusts, but the new penalty regime starts from April 2027, so the grace period is short. The threshold also steps down in later years, pulling in people earning above £30,000 and then £20,000, which means most landlords and sole traders will be caught eventually.
If your rental or trading income clears £50,000, you need software in place and a quarterly rhythm now, not next January. Our Making Tax Digital for Income Tax guide explains who is in scope, what counts as qualifying income, and how to get compliant without drowning in admin. Landlords in particular should read our landlord tax planning service page, because MTD changes how property income should be structured and recorded.
4. Capital gains tax small allowance, sharper edges
The capital gains annual exempt amount stays at £3,000 for 2026/27, a fraction of the £12,300 it was three years ago. The main rates hold at 18% for gains inside the basic-rate band and 24% above it, and those rates apply to most assets including residential property and shares.
One change does land this year, and it matters if you are selling a business. The rate under Business Asset Disposal Relief rose to 18% from 6 April 2026, up from 14% the year before and 10% not long ago. The relief still helps, but it is far less generous than the version many owners planned around. If a sale is on your horizon, the timing and the qualifying conditions deserve a proper look before you commit.
With the allowance this thin, the old habit of selling everything in one go is expensive. Spreading disposals across tax years, using both partners’ allowances, and harvesting losses all do more work than they used to.
5. What is coming next so you can plan around it
Several measures from the Autumn 2025 Budget land after this tax year, and the smart move is to act while the current rules still apply.
Tax rates on savings and rental property income rise by two percentage points from 2027/28, not this year, so 2026/27 is the cheaper year for that income. The cash ISA limit for savers under 65 drops to £12,000 from April 2027, while the overall £20,000 ISA allowance stays, which makes this year the last full chance to load a cash ISA. From April 2028 a council tax surcharge applies to homes worth over £2 million, and a pay-per-mile charge arrives for electric and hybrid vehicles. From 2027, unused pension funds start to fall inside inheritance tax.
None of these hit your 2026/27 return. All of them reward planning that starts now rather than the week before they take effect.
2026/27 at a glance
| Item | 2026/27 figure | Status |
|---|---|---|
| Personal allowance | £12,570 | Frozen to April 2031 |
| Higher rate threshold | £50,270 | Frozen to April 2031 |
| Additional rate threshold | £125,140 | Frozen to April 2031 |
| Employee NI main rate | 8% | Unchanged |
| Dividend allowance | £500 | Unchanged |
| Dividend tax (basic / higher) | 10.75% / 35.75% | Increased |
| CGT annual exempt amount | £3,000 | Unchanged |
| CGT main rates | 18% / 24% | Unchanged |
| Business Asset Disposal Relief rate | 18% | Increased |
| MTD for Income Tax | £50,000+ qualifying income | Now mandatory |
Where this leaves you
The honest summary of 2026/27 is that the government raised more tax without touching a single headline rate. Frozen thresholds do the work, dividend earners pay more, and a large group of sole traders and landlords now have a quarterly filing duty they did not have last year.
Two things are worth a phone call. If you take income as dividends and have not reviewed your salary split since the Budget, you are probably overpaying. If your self-employment or rental income clears £50,000, you are inside Making Tax Digital whether you have set up software or not. We handle both for clients across our London offices in Tooting and Barking and from Dubai. Book a review with IBISS & CO and we will tell you, in plain numbers, where the new rules cost you and how to claw it back legally.
Frequently Asked Questions
What changed in the UK tax year 2026/27?
The headline income tax rates and the personal allowance stayed the same, but the freeze on thresholds was extended to April 2031. Dividend tax rose to 10.75% for basic-rate and 35.75% for higher-rate taxpayers. Making Tax Digital for Income Tax became mandatory for people with qualifying income above £50,000, and the Business Asset Disposal Relief rate rose to 18%.
What is the personal allowance for 2026/27?
The personal allowance is £12,570, the same as it has been since April 2021. It is now frozen at that level until April 2031.
Do I have to use Making Tax Digital in 2026?
You must use Making Tax Digital for Income Tax from April 2026 if your combined income from self-employment and property is above £50,000. You keep digital records and submit quarterly updates to HMRC. Penalties for late submission are paused for the first year and begin from April 2027.
How much is dividend tax in 2026/27?
After the £500 dividend allowance, basic-rate taxpayers pay 10.75%, higher-rate taxpayers pay 35.75%, and additional-rate taxpayers pay 39.35%. The first two rates rose by two percentage points from 6 April 2026.
Did income tax rates go up in 2026?
The rates of 20%, 40% and 45% did not change. Most people will still pay more over time because the thresholds are frozen rather than rising with inflation, which gradually pulls income into higher tax bands.
