New Tax Year Arrives Monday — Here Is What Changes
The 2026/27 tax year starts on 6 April 2026 and brings a wave of changes that were announced months ago but land all at once. The Personal Allowance stays frozen at £12,570 for a seventh consecutive year, continuing to pull more earners into higher bands through fiscal drag. The higher rate threshold remains at £50,270, with both frozen until at least 2028.
Among the headline changes: dividend tax rates rise by 2% across the board, Business Asset Disposal Relief jumps to 18%, employer National Insurance climbs to 15%, and Making Tax Digital for Income Tax goes live. We cover each below.
Dividend Tax Rates Rise to 10.75% / 35.75%
From 6 April, the ordinary rate on dividend income rises from 8.75% to 10.75%, the upper rate from 33.75% to 35.75%, and the additional rate stays at 39.35%. The Dividend Allowance remains at £500. For a limited company director taking £40,000 in dividends, the extra 2% adds roughly £790 to the annual tax bill. If you have not yet declared a final dividend for 2025/26, you have until 5 April to do so at the current lower rates.
Source: GOV.UK — Changes to Dividend Tax Rates | Related: Dividend Tax Hike — Full Analysis | Dividend Tax Calculator
BADR Rate Jumps to 18% — Business Sellers Take Note
The Capital Gains Tax rate on disposals qualifying for Business Asset Disposal Relief (formerly Entrepreneurs' Relief) rises from 14% to 18% on 6 April — now matching the standard lower CGT rate. The same applies to Investors' Relief. The lifetime limit remains £1 million. Anyone with a business sale completing in early April should check whether the disposal date falls before or after the 6th, as the difference on a £500,000 gain is £20,000 in extra tax.
Source: GOV.UK — Business Asset Disposal Relief | Related: Capital Gains Tax Calculator
Employer NI Rises to 15% — Secondary Threshold Drops
From 6 April, employer National Insurance contributions rise from 13.8% to 15% and the secondary threshold — the per-employee earnings level at which employer NI kicks in — drops from £9,100 to £5,000. Together, these changes significantly increase the cost of employment for small businesses. To soften the blow, the Employment Allowance rises from £5,000 to £10,500, which fully offsets the increase for employers with four or fewer employees on average wages. Larger employers will feel the squeeze.
Source: GOV.UK — Rates and Thresholds for Employers 2025–26 | Related: Sole Trader vs Ltd Company Guide
MTD for Income Tax Is Now Live
Making Tax Digital for Income Tax is officially in force from 6 April for sole traders and landlords earning above £50,000. Around 864,000 taxpayers are in scope for this first phase. Digital record-keeping and quarterly updates replace the single annual Self Assessment return, with the first quarterly submission due by 7 August 2026. HMRC has confirmed no penalty points for late quarterly updates in the first 12 months, though penalties for late tax payments still apply. The threshold drops to £30,000 in April 2027 and £20,000 in April 2028.
Source: GOV.UK — Making Tax Digital for Income Tax | Related: Self-Employed Tax Calculator
Key Dates
5 April 2026 (Sunday) — End of the 2025/26 tax year. Last chance to use your £20,000 ISA allowance and declare dividends at current rates.
6 April 2026 (Monday) — New tax year begins. All changes above take effect: dividend tax rise, BADR at 18%, employer NI at 15%, MTD for Income Tax live.
30 April 2026 — Next Bank of England MPC decision on Bank Rate (currently 3.75%). Markets expect a hold.