The upcoming tax year is approaching, bringing significant changes that individuals should take note of. Unlike the regular calendar year, the tax year spans from April 6 to the subsequent April 5. During this period, personal tax allowances, ISA limits, and pension allowances reset.
One notable change is the introduction of new PAYE tax codes for employees. Starting next month, on April 6, several adjustments will come into effect.
Sole traders and landlords with an annual income exceeding £50,000 will be mandated to maintain digital records and submit tax updates quarterly beginning in April 2026. This process, known as Making Tax Digital by HMRC, necessitates the use of software compatible with storing income, expenses, VAT (if applicable), and tax adjustments.
Furthermore, alterations to agricultural and business property reliefs for Inheritance Tax purposes are scheduled for April 2026. A new cap of £2.5 million has been set before Inheritance Tax is imposed, with only 50% tax relief applicable to assets exceeding this threshold. The standard Inheritance Tax rate stands at 40%.
Effective April 2026, the Dividend Tax rate will increase to 10.75% for basic rate taxpayers and to 35.75% for higher rate taxpayers. This adjustment follows announcements made in the Budget.
Additionally, individuals working from home will no longer be eligible to claim tax relief from HMRC for extra household costs like gas and electricity starting in April 2026. The work from home allowance in the UK stands at a flat rate of £6 per week, and under current regulations, individuals can only claim this relief if they lack a physical office to work from, not if they choose to work remotely.
Lastly, the rate of Capital Gains Tax applicable to Business Asset Disposal Relief and Investors’ Relief will rise from 14% to 18% beginning April 2026. Despite the increase, the £1 million lifetime limit for these reliefs remains in place, resulting in entrepreneurs and investors paying higher taxes on qualifying business sales.