The upcoming tax year brings significant changes that individuals should take note of. Unlike the standard calendar year, the tax year runs from April 6 to April 5 of the following year, resetting personal tax allowances, ISA limits, and pension allowances.
Starting April 6, employees will encounter new PAYE tax codes, while sole traders and landlords with an annual income exceeding £50,000 must maintain digital records and provide quarterly tax updates from April 2026 under HMRC’s Making Tax Digital initiative. This requires using compatible software to store income, expenses, VAT (if applicable), and tax adjustments.
Inheritance Tax regulations will see alterations in April 2026, with a new £2.5 million cap before tax is due, applying a 50% tax relief to assets over this amount, up from the previous £1 million limit. The standard Inheritance Tax rate remains at 40%.
Basic rate taxpayers will face an increase in the Dividend Tax rate from 8.75% to 10.75%, while higher rate taxpayers will see a rise from 33.75% to 35.75% following recent Budget announcements. Dividend Tax refers to profits distributed by companies to shareholders.
From April 2026, individuals working from home won’t be eligible to claim tax relief for additional household expenses like gas and electricity. The UK’s work from home allowance stands at a fixed rate of £6 per week, available only to those without a physical office to work from.
Moreover, the Capital Gains Tax rate for Business Asset Disposal Relief and Investors’ Relief will increase from 14% to 18% starting April 2026, with the £1 million lifetime limit for these reliefs remaining unchanged. This adjustment means entrepreneurs and investors will pay more tax on qualifying business transactions.