New Tax Year 2026/27: Everything UK Individuals, Landlords & Small Businesses Need to Know

The UK tax year 2026/27 is one of the most consequential in a decade.

For the first time, the government’s long-promised Making Tax Digital for Income Tax programme becomes a legal reality.
Dividend tax rates are rising. Business Asset Disposal Relief costs more.
And a decade-long freeze on personal allowances and tax bands means millions of workers and business owners are paying more tax simply because their wages have moved with inflation.

Whether you are a sole trader in Wimbledon, a landlord across London, a limited company director, or an employee with multiple income sources, this guide explains every change that matters for 2026/27 and, crucially, what you should be doing right now to stay compliant and minimise your tax bill.

When Does the 2026/27 Tax Year Start and End?

The 2026/27 UK tax year runs from 6 April 2026 to 5 April 2027. This date has not changed since 1752, when the British calendar shifted from the Julian to the Gregorian system.

For Self Assessment purposes, the key deadlines to remember for the 2026/27 tax year are:

• 31 October 2027: Deadline for paper Self Assessment tax returns for 2026/27
• 31 January 2028: Deadline for online Self Assessment tax returns for 2026/27
• 31 January 2028: Deadline for payment of any tax owed for 2026/27
• 31 July 2027: Second payment on account (for those making interim payments)
• MTD users: Quarterly update deadlines throughout the year (see Section 3)

Income Tax Bands & Personal Allowance 2026/27

Income tax rates and thresholds are entirely unchanged for 2026/27 across England, Wales, and Northern Ireland.

However, the ongoing freeze on these thresholds, now confirmed until at least April 2031, means you could be paying significantly more tax over time as wages rise with inflation, even though the rates themselves have not moved.

2026/27 Income Tax Bands (England, Wales & Northern Ireland)

Band	Taxable Income	Rate
Personal Allowance	Up to £12,570	0%
Basic Rate	£12,571 to £50,270	20%
Higher Rate	£50,271 to £125,140	40%
Additional Rate	Over £125,140	45%

These thresholds have been frozen since April 2021 and are now legislated to remain frozen until April 2031. This ten-year freeze is the single biggest stealth tax rise in modern British history, and it will continue pulling more individuals into the higher-rate bracket every year their income rises.

What Is Fiscal Drag and Why Does It Matter?

Fiscal drag is the mechanism by which a frozen tax threshold causes more tax to be collected as wages increase with inflation.
If your salary rises from £49,000 to £52,000 in 2026/27, a modest 6% increase in line with wage growth, a larger share of your income now falls in the 40% band.
Your take-home pay may not increase as much as you expected.
For London employees and business owners, where average salaries and rental incomes are consistently above the national average, fiscal drag is an especially significant issue.

The £100,000 Trap: Personal Allowance Taper

If your income exceeds £100,000, your personal allowance is reduced by £1 for every £2 earned above that threshold.
By £125,140 it is entirely withdrawn. This creates an effective 60% marginal tax rate on income between £100,000 and £125,140, making it one of the most expensive income bands in the UK tax system.
Pension contributions, salary sacrifice, or charitable giving can often be used to manage income below this level.

Scottish Taxpayers

Scotland operates a separate income tax system with six bands rather than three.
Scottish taxpayers should note that their rates differ: the starter rate (19%), basic rate (20%), intermediate rate (21%), higher rate (42%), advanced rate (45%), and top rate (48%) apply to non-savings income.
Dividend and savings income continues to follow UK-wide rules even for Scottish residents.

Making Tax Digital (MTD) for Income Tax, Now Live

This is the single biggest change of the 2026/27 tax year.
After years of delays, Making Tax Digital for Income Tax (MTD for IT) is now a legal requirement for the first wave of taxpayers from 6 April 2026.

Who Must Sign Up for MTD for Income Tax from April 2026?

You must comply with MTD for Income Tax in 2026/27 if your gross income from self-employment and/or UK property income combined exceeded £50,000 in the 2024/25 tax year.
This is based on turnover before expenses, not profit.

• Sole traders with gross self-employment income over £50,000
• Landlords with gross rental income over £50,000
• Individuals with combined self-employment and rental income over £50,000

If your combined qualifying income was between £30,000 and £50,000, you joined in April 2027. If your income was between £20,000 and £30,000, you join from April 2028.

What Does MTD for Income Tax Actually Require?

• Digital records: Keep digital records of income and expenses using HMRC-recognised software (such as Xero, Sage, or QuickBooks)
• Quarterly updates: Submit four quarterly updates to HMRC each year reporting your income and expenses digitally
• Final declaration: Submit a Final Declaration (replacing the annual Self Assessment return) by 31 January after the tax year end
• No penalties yet: The first year (2026/27) is a ‘soft landing’, no late-filing penalty points apply for missing quarterly deadlines
• Penalties from 2027: From April 2027, full penalties apply: two missed quarterly submissions in 24 months result in a £200 fine

Dividend Tax Rates 2026/27, A Significant Rise

One of the most impactful changes for London limited company directors and shareholders is the increase in dividend tax rates from 6 April 2026. This change was announced in the Autumn Budget 2025 and affects all dividend income received outside of ISA wrappers.

2026/27 Dividend Tax Rates

Tax Band	2025/26 Rate	2026/27 Rate	Change
Basic Rate (up to £50,270)	8.75%	10.75%	+2 percentage points
Higher Rate (£50,271–£125,140)	33.75%	35.75%	+2 percentage points
Additional Rate (over £125,140)	39.35%	39.35%	No change
Tax-Free Dividend Allowance	£500	£500	Unchanged

In practice, a basic-rate taxpayer receiving £20,000 in dividends per year outside an ISA will pay an additional £390 in tax in 2026/27. A higher-rate taxpayer receiving the same amount will also pay an additional £390. Combined with frozen allowances and MTD costs, the cumulative impact on London director-shareholders is considerable.

What Should Limited Company Directors Do?

The rise in dividend tax rates does not mean dividends are no longer tax-efficient; they almost always remain preferable to taking all income as salary.
However, it does mean the calculation has shifted. Directors should review:

• Whether their current salary-dividend split is still optimal for 2026/27
• Whether pension contributions into a workplace or SIPP scheme could reduce taxable dividend income
• Whether retaining profits in the company to invest in qualifying assets may be more efficient than extracting them
• Whether the timing of dividend declarations before or after 6 April 2026 could have affected their 2025/26 or 2026/27 position

Protax Consultants offers a dedicated Director Salary and Dividend Planning service. Our ACCA advisers model your optimal extraction strategy for 2026/27 based on your actual company profit, other income, and family situation.

National Insurance Contributions (NIC) 2026/27

National Insurance rates and thresholds are largely unchanged for 2026/27, though several specific areas need attention from employers, the self-employed, and overseas workers.

Employee NIC (Class 1) 2026/27

Earnings Band	Employee NIC Rate
Up to £12,570 (Primary Threshold)	0%
£12,570 to £50,270	8%
Over £50,270	2%

Employer NIC (Class 1) 2026/27

Threshold	Rate
Up to £5,000 per year (Secondary Threshold)	0%
£5,000 and above	15%

The employer’s Secondary Threshold remains at £5,000, a significant reduction from the pre-2025/26 level of £9,100.
The Employment Allowance remains at £10,500 with no upper earnings cap, which means most small businesses with employer NIC bills under £10,500 will continue to pay nothing.

Self-Employed NIC (Class 4) 2026/27

• Profits between £12,570 and £50,270: Class 4 NIC at 6%
• Profits above £50,270: Class 4 NIC at 2%
• Voluntary Class 2 NIC: £3.65 per week (for those below the Small Profits Threshold of £7,105 who wish to maintain State Pension entitlement)

Key NIC Changes for Employers from April 2026

• New benefit exemption: Employers can now reimburse employees tax-free for flu vaccinations, eye tests, and homeworking equipment purchased by the employee personally (previously the employer had to buy these items directly)
• Salary sacrifice cap: A new £2,000 annual cap will apply to salary sacrifice pension contributions that qualify for NIC relief from 2026/27 onwards
• SSP reform: Statutory Sick Pay rules change: from April 2026, the Lower Earnings Limit is removed, meaning all employees, regardless of earnings, are entitled to SSP

Parental pay rates: Statutory parenting payments (Maternity, Paternity, Shared Parental, Adoption, Bereavement) rise to £194.32 per week

Capital Gains Tax (CGT) Changes 2026/27

Capital Gains Tax rates for most disposals are unchanged for 2026/27.
The headline rates remain 18% (basic rate taxpayers) and 24% (higher and additional rate taxpayers) on most gains, including residential property gains.
The annual CGT exemption remains at £3,000.
However, there is one very significant change that will affect business owners planning an exit or disposal:

Business Asset Disposal Relief (BADR) Rate Rises to 18%

Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief, allows qualifying business owners to pay CGT at a reduced rate on the disposal of their business or qualifying assets.
From 6 April 2026, this rate increases from 14% to 18%.

Disposal Type	2025/26 Rate	2026/27 Rate
Gains on residential property (higher/additional)	24%	24%
Gains on most assets (higher/additional)	24%	24%
Business Asset Disposal Relief gains	14%	18%
Investors’ Relief qualifying gains	14%	18%
Annual CGT Exemption	£3,000	£3,000

Corporation Tax & Small Business Changes 2026/27

Corporation Tax rates are unchanged for 2026/27. Limited companies continue to operate on the tiered structure introduced in April 2023:

Company Profits	Rate
Up to £50,000 (Small Profits Rate)	19%
£50,001 to £250,000 (Marginal Relief applies)	Tapered 19%–25%
Over £250,000 (Main Rate)	25%

Corporation Tax Late Filing Penalties Double from April 2026

An important change from 1 April 2026: corporation tax late filing penalties are doubled.
The new penalty structure for CT returns with a due date on or after 1 April 2026 significantly increases the cost of missing filing deadlines.
Companies with a history of late returns should take immediate steps to ensure their accounts and CT600 are filed on time.

Capital Allowances: Key Change for 2026/27

Two significant capital allowances changes from April 2026 affect small and medium-sized businesses:

• WDA reduction: The main rate Writing Down Allowance (WDA) for plant and machinery falls from 18% to 14%, meaning tax relief on existing asset pools is received more slowly
• New 40% FYA: A new 40% First-Year Allowance (FYA) for main-rate assets is introduced from 1 January 2026, benefiting unincorporated businesses, sole traders, and landlords who cannot claim Full Expensing.

If you are planning to invest in equipment, vehicles, or machinery, the timing of the purchase could significantly affect your tax position.

• EV extension: 100% First-Year Allowance for zero-emission vehicles and EV charge points is extended to March/April 2027

Business Rates: Good News for Hospitality, Retail & Leisure in London

From 1 April 2026, permanently lower business rate multipliers apply to retail, hospitality, and leisure properties in England with rateable values below £500,000.
Larger properties see multiplier increases. Additionally, a new 15% business rates relief applies to pubs and live music venues for 2026/27.
London small business owners in these sectors should check their revised bills and ensure any available relief is applied.

Inheritance Tax (IHT) Changes 2026/27

Inheritance Tax rules are changing significantly from April 2026, with the most material changes affecting family businesses and farms.
The IHT nil-rate band remains frozen at £325,000 until April 2031, a threshold unchanged since 2009.

Business Relief and Agricultural Relief: 100% Cap Introduced

From 6 April 2026, Business Relief (BR) and Agricultural Relief (AR) at the 100% rate are capped at £2.5 million of qualifying assets per person.
Assets above this threshold receive only 50% relief. This affects:

• Family business owners with businesses worth over £2.5 million
• Farmers with agricultural land and property above the threshold
• Investors holding shares on AIM or similar recognised exchanges (separate rules apply; AIM shares now qualify for only 50% relief rather than 100%)

For many London business owners with valuable commercial property or business interests, IHT planning has become significantly more urgent.
The combination of frozen nil-rate bands and reduced business relief could dramatically increase the IHT payable on your estate.

Looking Ahead: Private Pensions & IHT from April 2027

From April 2027, unspent pension funds will be brought within the scope of Inheritance Tax for the first time.
If you hold significant pension assets that you intend to pass to your beneficiaries, immediate review of your pension strategy is advisable.

Property Tax Changes for Landlords 2026/27

Landlords across London face several compounding pressures in 2026/27:

MTD for Income Tax: Landlords Must Act Now

Landlords and property investors with gross rental income exceeding £50,000 (based on 2024/25 returns) must register for MTD for Income Tax by 6 April 2026 and begin quarterly digital reporting.
This applies whether you own one property or many. If you currently manage your property tax affairs with spreadsheets or paper records, you need to switch to compatible software immediately.

Section 24 Mortgage Interest Restriction Continues

The restriction on mortgage interest relief for residential landlords continues in full for 2026/27.
You cannot deduct mortgage interest directly from rental income. Instead, you receive a 20% tax credit on the finance costs.
For higher and additional rate taxpayers, this restriction continues to significantly increase the effective tax burden on property income.
A limited company structure may offer a more efficient alternative for new property acquisitions. Speak to Protax Consultants for a personalised comparison.

Capital Gains Tax on Property

The CGT annual exemption remains £3,000, and the main CGT rates on residential property remain 18% (basic rate) and 24% (higher rate).
The 60-day reporting window for UK residential property gains continues.
Note: from April 2027, the rates applying to savings income and property income will increase by 2 percentage points, adding a new urgency to tax planning for landlords considering disposals.

Looking Ahead: Property Income Tax Rate Rise from April 2027

From 6 April 2027, new income tax rates apply to rental income: 22%, 42%, and 47% in the basic, higher, and additional rate bands, respectively.
If you are considering selling property or restructuring ownership, 2026/27 may be the last full year before these higher rates apply.

Employee Tax Changes 2026/27

Employees face a number of specific changes in 2026/27 that are distinct from self-employed and business owner changes:

Homeworking Flat-Rate Allowance Abolished

From 6 April 2026, employees can no longer claim the flat-rate home-working tax relief of typically £6 per week (£312 per year) directly from HMRC via their tax code.
This relief has been available since the pandemic allowed millions to work from home.
If your employer reimburses you for actual homeworking costs, that payment remains tax-free.
But if your employer does not offer any reimbursement, this relief is simply gone.

New Employer Benefit Exemptions

To partially offset the homeworking change, from 6 April 2026, employers can reimburse employees tax-free for:

• Annual flu vaccinations purchased personally by the employee
• Eye tests for screen-based work purchased personally by the employee
• Homeworking equipment (desks, monitors, chairs) purchased personally by the employee

Previously, to avoid benefit-in-kind charges, the employer had to purchase these items directly.
This change gives employers more flexibility in how they structure staff benefits.

National Minimum Wage Increases from April 2026

Worker Category	NMW Rate (From April 2026)
Aged 21 and over (National Living Wage)	£12.71 per hour
Aged 18–20	£10.85 per hour
Aged 16–17 & Apprentices	£8.00 per hour

ISA Allowances & Savings 2026/27

The overall ISA annual subscription limit remains £20,000 for 2026/27.
This allowance is use-it-or-lose-it: any unused allowance from 2025/26 cannot be carried forward.

ISA Type	2026/27 Allowance
Overall ISA allowance	£20,000
Cash ISA (under 65s)	£12,000 cap from April 2027 (not yet in force for 2026/27)
Lifetime ISA	£4,000 (within £20,000 limit)
Junior ISA	£9,000
Dividend allowance (outside ISA)	£500
Personal Savings Allowance (basic rate)	£1,000
Personal Savings Allowance (higher rate)	£500

With dividend tax rates rising, ISAs become more valuable than ever as a tax-efficient home for investment income.
The important note for 2026/27: the £12,000 Cash ISA cap for under-65s applies from April 2027, so 2026/27 may be your last chance to maximise cash ISA contributions at the full £20,000 limit before that restriction takes effect.

What London Businesses Should Do Right Now

The combination of changes for 2026/27 creates a clear and urgent action list for every individual, landlord, and business owner in London.

Here is what Protax Consultants recommends:

Immediate Actions (April 2026)

• Register for MTD for Income Tax if your qualifying income exceeded £50,000 in 2024/25; this is a legal requirement from 6 April 2026
• Set up HMRC-recognised accounting software (Xero or Sage) if you have not already done so
• Review your director’s salary and dividend strategy for 2026/27 in light of the 2% dividend tax rise
• Update your payroll for National Minimum Wage changes and the NIC Secondary Threshold of £5,000
• Check your business rates bill if you operate in retail, hospitality, or leisure; new lower multipliers may apply

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FAQs: New UK Tax Year 2026/27

When does the new UK tax year start in 2026?
The 2026/27 UK tax year starts on 6 April 2026 and ends on 5 April 2027.

What are the income tax rates for 2026/27?
Income tax rates are unchanged for 2026/27: 20% basic rate (£12,571–£50,270), 40% higher rate (£50,271–£125,140), and 45% additional rate (above £125,140). The personal allowance remains £12,570.

Do I need to register for Making Tax Digital in 2026/27?
You must register for MTD for Income Tax if your gross self-employment and/or property income exceeded £50,000 in the 2024/25 tax year. There are no late-filing penalty points for quarterly updates in the first year (2026/27), but you are still legally obliged to maintain digital records and submit quarterly updates.

Are dividend tax rates changing in 2026/27?
Yes. The basic rate of dividend tax rises from 8.75% to 10.75%, and the higher rate rises from 33.75% to 35.75% from 6 April 2026. The additional rate remains 39.35%. The tax-free dividend allowance stays at £500.

What is the capital gains tax rate in 2026/27?
The main CGT rates are unchanged at 18% (basic rate) and 24% (higher rate). However, the Business Asset Disposal Relief (BADR) rate rises from 14% to 18% for disposals from 6 April 2026. The annual CGT exemption remains £3,000.

How does the 2026/27 tax year affect landlords in London?
Landlords earning over £50,000 in gross rental income must now comply with MTD for Income Tax. The Section 24 mortgage interest restriction continues in full. The 60-day CGT reporting rule for property disposals still applies. From April 2027, rental income tax rates will rise by 2%, making 2026/27 a critical planning year for London landlords considering disposals or restructuring.

Can Protax Consultants help me with my 2026/27 tax return in London?
Yes. Protax Consultants are ACCA-certified, HMRC-authorised agents based in Wimbledon, serving clients across all London boroughs. We provide Self Assessment, MTD compliance, payroll, VAT, Corporation Tax, capital gains, and landlord tax services. Contact us for a free initial consultation.