What tax changes for you from 6 April 2026?

The 2026/27 tax year brings a raft of changes that will affect individuals, business owners, and investors across the UK. Many of these measures were first announced in the October 2024 Budget, and several represent meaningful cost increases that demand fresh planning. Whether you are a company director, a landlord, a shareholder, or a sole trader, there is something here that is likely to affect your tax bill.

Dividend tax rates rise again

From 6 April 2026, the rates of income tax on dividends increase by two percentage points at the basic and higher rate bands. This is a significant change for shareholders in owner-managed businesses, who often structure their remuneration to include a meaningful dividend element.

The annual dividend allowance stays at £500 — the much-reduced figure in place since April 2024. With the free allowance already at a historic low and rates now higher, director-shareholders taking dividends from their own companies will see a noticeably larger tax bill.

Directors' loan charge increases

The section 455 Corporation Tax charge on overdrawn directors' loan accounts in close companies rises by 2%, from 33.75% to 35.75% for any loan made on or after 6 April 2026. This tax is charged on the company rather than the individual, but in practice the cost falls on the owner-manager.

Close companies — broadly those controlled by five or fewer participators — commonly use loan accounts as a flexible way to manage cash flow. An overdrawn loan not repaid within nine months of the company's accounting year-end triggers the s455 charge. While the charge is refundable once the loan is repaid, it represents a real cash-flow cost in the meantime. The increase makes it more important than ever to keep loan accounts in credit or to clear any overdrawn balance promptly.

Business Asset Disposal Relief: rate rises to 18%

Business Asset Disposal Relief (BADR) — formerly Entrepreneurs' Relief — has been subject to a phased rate increase since the October 2024 Budget. The favourable 10% rate ended on 5 April 2025. A transitional rate of 14% applied throughout 2025/26. From 6 April 2026, the rate rises again to 18%.

The lifetime allowance for BADR remains at £1 million. Qualifying business owners, partners, and employees with EMI options who are planning a disposal should factor the higher rate into any sale negotiations and retirement planning.

Frozen thresholds — the stealth tax continues

Income tax thresholds remain frozen until April 2028. The Personal Allowance stays at £12,570, the basic rate ceiling at £50,270, and the additional rate threshold at £125,140.

In a period of wage growth, frozen thresholds act as a stealth tax: more taxpayers are dragged into higher bands each year without any rate change being announced. If you received a pay rise in 2025, it is worth checking whether your total income now crosses any of these thresholds — and adjusting pension contributions or salary sacrifice arrangements accordingly.

Inheritance tax: new limits for farms and family businesses

From April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) are subject to a combined cap. 100% relief is available only on the first £1 million of qualifying agricultural or business property. Above that threshold, relief reduces to 50%, creating an effective 20% IHT charge on the excess.

For farming families and the owners of unlisted trading businesses, this represents a fundamental shift. Estates that were previously fully sheltered from IHT now face significant exposure on higher-value holdings. The £1 million threshold applies per estate, and spouses or civil partners can each claim the allowance — but the interaction with other IHT reliefs and with the nil-rate band requires careful planning.

Making Tax Digital for Income Tax: the clock has started

After years of delays, Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) begins in April 2026 for the first wave of taxpayers. If you are self-employed or a landlord with total gross income from those sources exceeding £50,000, you are required to comply from 6 April 2026.

This means: keeping digital records using MTD-compatible software, submitting quarterly updates to HMRC summarising your income and expenses, and filing an End of Period Statement and Final Declaration at the year end. The familiar annual Self Assessment return is being replaced for this group.

From April 2027, the mandate extends to those with income above £30,000, with a further phase planned for those above £20,000 thereafter.

Umbrella companies, recruitment agencies and PAYE liability

A major change affecting a wide net of recruitment agencies comes into force from 6 April 2026. New legislation in Chapter 11, Part 2 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) introduces a 'joint and several liability' rule designed to tackle non-compliance in labour supply chains that include an umbrella company or any other third party intermediary. The measure targets situations where umbrella companies contract out workers to other organisations, creating a blurring of responsibilities around off-payroll labour and IR35 rules.

Under the new regime, the umbrella company retains primary responsibility for deducting PAYE and National Insurance Contributions (NIC) from the pay of workers supplied to clients. However, if the umbrella company fails to meet that obligation, liability shifts — first to the recruitment agency, and potentially further up the chain.

In practice, this means recruitment agencies can no longer treat the umbrella company as a firewall against PAYE risk. Agencies should carry out thorough due diligence on any umbrella companies they work with, ensure contractual protections are in place, and keep records that demonstrate their compliance. HMRC has signalled that this is an area of active enforcement focus.

Venture capital trusts (VCT): relief cut but thresholds raised

Several changes to the venture capital trust (VCT) regime take effect from 6 April 2026, with the headline change being a significant reduction in the income tax relief rate — down from 30% to 20%.

VCTs are investment vehicles similar to investment trusts, but they focus on smaller, younger, and inherently riskier companies. The income tax relief on new VCT subscriptions has historically been one of the most attractive incentives available to UK investors. The reduction to 20% means someone investing the full £200,000 annual allowance will now receive a maximum relief of £40,000, down from £60,000 previously — a £20,000 reduction in the annual tax saving.

Against this, there are meaningful positive changes for the companies that VCTs invest in:

• The gross assets test before allotting shares doubles from £15m to £30m
• The annual investment limit for knowledge-intensive companies doubles to £20m
• The annual investment limit for all other qualifying companies rises to £10m
• The lifetime investment limit increases from £20m to £40m for knowledge-intensive companies, and from £12m to £24m for others

These changes make VCTs accessible to a broader range of growing businesses and should increase the pool of qualifying investee companies, even as the investor-facing relief becomes less generous.

Enterprise investment schemes (EIS): higher limits for investee companies

From 6 April 2026, the gross asset thresholds for companies raising funds through the Enterprise Investment Scheme (EIS) increase — though these changes apply to Great Britain only, not Northern Ireland.

The key changes for EIS investee companies are:

These increases mean that larger, more established businesses can now qualify for EIS fundraising, significantly widening the scheme's reach. The annual and lifetime limits on the amount companies can raise through EIS also increase in line with these thresholds.

Importantly, the limits for individual investors are unchanged — the annual EIS investment limit per person remains £1 million (or £2 million for knowledge-intensive companies), and income tax relief continues at 30%.

Wages, statutory payments, and other changes

The National Living Wage sees a further increase in April 2026, following the 4.1% rise to £12.21 per hour that took effect in April 2025. Statutory Maternity, Paternity, Adoption, and Sick Pay rates have also increased in line with annual uprating.

For those operating in the Construction Industry Scheme, updated obligations apply from April 2026 — it is worth reviewing whether subcontractors should be re-verified or whether gross payment status applications are appropriate. CIS compliance remains an area of active HMRC scrutiny.

The employer National Insurance rate of 15% and the reduced secondary threshold of £5,000 (introduced in April 2025) remain in place for 2026/27 and continue to bear significantly on remuneration planning for directors and family members employed within a business.

What should you do now?

The 2026/27 changes collectively represent a meaningful increase in the tax burden on individuals, business owners, and investors. The dividend rate rises, the directors' loan charge, the BADR increase, and the IHT changes are each consequential in their own right — and for many people, several will apply simultaneously. The beginning of the tax year is the right moment to review your salary and dividend structure, your pension contributions, your estate planning position, and your MTD readiness. A conversation with your accountant now can save considerably more than it costs.