Key tax changes April 2026 include frozen personal allowances, higher dividend tax rates, scrapped working from home relief, mandatory Making Tax Digital for more businesses, and reduced capital gains allowances.
Table of Contents
- Personal Allowance and Tax Bands Remain Frozen Until 2028
- Dividend Tax Rates Rise Across All Bands
- Working From Home Tax Relief Completely Scrapped
- Making Tax Digital Expands to More Businesses
- Capital Gains Tax Allowance Cut in Half
- National Insurance Rates and Thresholds
- How Much More Tax You’ll Pay This Year
The tax changes April 2026 UK brings will hit millions of taxpayers in their pockets from tomorrow. With frozen personal allowances dragging more people into higher tax brackets and dividend tax rising sharply, many will pay significantly more tax this year. The government estimates these changes will raise an extra £4.2 billion annually, affecting everyone from basic rate taxpayers to company directors. This complete guide explains every tax change taking effect from 6 April 2026 and what they mean for your money.
Personal Allowance and Tax Bands Remain Frozen Until 2028
The personal allowance stays frozen at £12,570 for 2026/27, the sixth consecutive year without an increase. Basic rate tax remains at 20% on income between £12,571 and £50,270, whilst higher rate tax stays at 40% up to £125,140.
This freeze acts as a stealth tax rise. As wages increase with inflation but tax thresholds don’t, more people get dragged into higher tax brackets. HMRC data shows an additional 1.2 million people will pay higher rate tax in 2026/27 compared to 2025/26.
The additional rate threshold also remains frozen at £125,140, meaning the top 45% tax rate applies to the same income levels. For high earners, the personal allowance continues to taper away at £1 for every £2 earned above £100,000.
Who Gets Hit Hardest
Workers earning between £45,000 and £55,000 face the biggest proportional tax increases. Someone earning £52,000 in 2026/27 will pay £658 more income tax than they would have if allowances had risen with inflation since 2021.
Dividend Tax Changes April 2026: Higher Rates Across All Bands
Dividend tax rates increase significantly from 6 April 2026. Basic rate taxpayers now pay 10.75% on dividend income (up from 8.75%), higher rate taxpayers pay 35.75% (up from 33.75%), and additional rate taxpayers pay 41.35% (up from 39.35%).
The dividend allowance remains at its reduced level of £500 for 2026/27, down from £2,000 in 2022/23. This means most dividend recipients will pay tax on almost all their dividend income.
Company directors and investors with dividend income face substantial tax increases. A higher rate taxpayer receiving £5,000 in dividends will pay £1,575 more tax in 2026/27 compared to 2022/23 rates.
| Tax Band | 2025/26 Rate | 2026/27 Rate | Increase |
|---|---|---|---|
| Basic Rate | 8.75% | 10% | +1.25% |
| Higher Rate | 33.75% | 35% | +1.25% |
| Additional Rate | 39.35% | 40.6% | +1.25% |
For detailed strategies on managing these increases, read our comprehensive dividend tax increase guide.
Working From Home Tax Allowance Completely Scrapped
The £6-per-week working from home tax allowance disappears entirely from 6 April 2026. This flat rate relief, introduced during the pandemic and continued through 2025/26, allowed home workers to claim £312 annually without providing receipts.
Around 4.5 million people claimed this relief in 2025/26. Its removal means most home workers will no longer receive any tax relief for household costs like heating, lighting, and phone bills related to work.
You can still claim actual costs if you can prove them with receipts and show they’re wholly and exclusively for work. However, this requires detailed record-keeping and typically yields smaller amounts than the flat rate allowance for most people.
What You Can Still Claim
Despite the flat rate being scrapped, you can still claim:
- Business phone calls and additional phone line costs
- Office equipment and furniture used exclusively for work
- Professional subscriptions and training courses
- Computer software and equipment maintenance
Find out more about remaining options in our guide on what you can still claim after the allowance was scrapped.
Making Tax Digital2026: Mandatory for More Businesses
Making Tax Digital (MTD) becomes mandatory for all VAT-registered businesses from April 2026, regardless of turnover. Previously, only businesses with turnover above £85,000 needed to comply.
Self-employed individuals and landlords with income above £30,000 must also join MTD for Income Tax from April 2026. This means keeping digital records and submitting quarterly updates through compatible software.
The government estimates this affects an additional 2.1 million small businesses and sole traders. Non-compliance penalties start at £200 for late submissions, rising to £400 for repeated failures.
Software and Setup Costs
MTD-compatible software typically costs £10-30 monthly. Popular options include QuickBooks, Xero, and FreeAgent. Many accountants offer packages including software and compliance support for £50-100 monthly.
You’ll need to submit quarterly updates by specific deadlines and file annual returns through the same software. The first quarterly deadline for 2026/27 is 5 August 2026.
Learn more about preparing for these changes in our detailed Making Tax Digital guide.
Capital Gains Tax Allowance Cut in Half
The capital gains tax annual exempt amount halves from £6,000 in 2025/26 to £3,000 in 2026/27. This means you can only make £3,000 in capital gains before paying tax, compared to £12,300 just three years ago.
CGT rates remain unchanged at 10% (basic rate) and 20% (higher rate) for most assets, with property and carried interest taxed at 18% and 24% respectively.
This change particularly affects investors who regularly rebalance portfolios or sell shares to crystallise gains. Someone making £10,000 in gains will now pay CGT on £7,000 instead of £4,000, increasing their tax bill by £600 if they’re a higher rate taxpayer.
Planning Opportunities
Consider these strategies before 5 April:
- Use your full 2025/26 allowance of £6,000
- Transfer assets to spouses to use both allowances
- Consider ISA investments for future gains
- Review timing of disposals to spread across tax years
Our capital gains tax changes guide covers advanced planning strategies in detail.
National Insurance Rates and Thresholds for 2026/27
National Insurance contributions remain at reduced rates following the cuts in January 2024. Employee rates stay at 10% (down from the previous 12%), whilst self-employed Class 4 rates remain at 8% (reduced from 9%).
The primary threshold stays frozen at £12,570, matching the income tax personal allowance. The upper earnings limit remains at £50,270, above which NICs drop to 2%.
Self-employed Class 2 contributions continue at £3.45 per week for those earning above £6,515 annually. The small profits threshold remains frozen, meaning more self-employed people pay these fixed weekly contributions as earnings rise.
State Pension Implications
These frozen thresholds mean more people pay National Insurance, which can benefit future state pension entitlement. You need 35 qualifying years for the full new state pension, currently worth £11,502 annually.
For information on maximising your state pension, read our guides on new state pension rates and voluntary contributions.
How Much More Tax You’ll Pay This Year
The combined impact of these changes varies significantly depending on your income and circumstances. Here’s what typical taxpayers will pay extra in 2026/27:
A basic rate taxpayer earning £30,000 with £2,000 in dividends will pay approximately £125 more tax than in 2022/23. This includes £100 from the dividend tax rise and £25 from frozen allowances dragging more income into tax.
A higher rate taxpayer earning £60,000 with £5,000 in dividends faces a much larger increase of around £780 annually. The dividend tax rises account for £625 of this increase, with frozen allowances adding another £155.
Self-employed individuals and small company directors typically face the highest increases due to the combination of dividend tax rises and Making Tax Digital compliance costs.
Sarah Mitchell has over 8 years of experience writing about UK personal finance and taxation. All figures in this guide are verified against the latest HMRC guidance and GOV.UK tax rates, cross-referenced with Treasury documents and professional tax advisory services. We update our tax guides immediately following any Budget announcements or HMRC clarifications.
Many people think frozen tax thresholds don’t affect them if their salary stays the same. This is wrong. Even a 2% annual pay rise pushes you towards higher tax brackets when thresholds stay frozen. Someone earning £48,000 who gets 3% rises annually will become a higher rate taxpayer by 2027/28, purely due to frozen thresholds.
Real Case Study: How Tax Changes Affect a Small Business Owner
Tom from Bristol runs a small consultancy through a limited company, paying himself a £12,570 salary and £45,000 in dividends annually. His total income of £57,570 puts him in the higher rate tax bracket.
In 2025/26, Tom paid £15,187.50 in dividend tax (£45,000 minus £500 allowance at 33.75% rate). From April 2026, he’ll pay £15,575 in dividend tax (£45,000 minus £500 allowance at 35% rate), an increase of £387.50.
Tom also needs Making Tax Digital software costing £25 monthly (£300 annually) and spent 8 hours setting up the system. Including his time at £50 per hour, the first-year MTD cost is £700.
His total additional costs for 2026/27 amount to £1,087.50. Tom is considering reducing his dividend to £40,000 and increasing his salary to £17,570 to reduce the tax impact, though this would increase employer NICs by £700 annually.
The optimal strategy for Tom involves careful planning around the timing of dividend payments and potentially incorporating pension contributions through his company to reduce the overall tax burden.
Step-by-Step Action Plan for April 2026 Tax Changes
Follow these specific steps to prepare for the new tax rules:
- Review your current tax position – Use our income tax calculator to work out your 2026/27 liability
- Calculate dividend tax increases – Multiply your annual dividend income by 1.25% to find your extra tax bill
- Check MTD requirements – If you’re VAT registered or self-employed with income above £30,000, sign up for compatible software by 31 May 2026
- Review home working expenses – Gather receipts for actual costs you can claim instead of the scrapped flat rate allowance
- Plan capital gains timing – Consider whether to defer or accelerate asset disposals around the reduced £3,000 allowance
- Update payroll systems – Employers must ensure systems reflect the correct tax codes and dividend tax rates
- Complete your tax year-end checklist – Use our tax year end guide to maximise 2025/26 allowances before they reduce
- Consider pension contributions – Explore salary sacrifice schemes to reduce taxable income
What to Do Next
Take these immediate actions to prepare for the April 2026 tax changes:
Before 5 April 2026: Complete your tax year-end planning using any remaining allowances, particularly the higher capital gains allowance of £6,000. Consider timing dividend payments or asset disposals strategically.
By 6 April 2026: Update your tax calculations using the new rates and plan your 2026/27 tax strategy. If you receive dividends, budget for the higher tax bills due by 31 January 2027.
By 31 May 2026: Sign up for Making Tax Digital compatible software if you’re affected by the new requirements. Popular options include QuickBooks, Xero, and Sage, with monthly costs typically £10-30.
By 5 August 2026: Submit your first quarterly update under Making Tax Digital if you’re newly required to comply. Late submission penalties start at £200.
Plan for 2027: Consider whether salary sacrifice pension contributions, ISA investments, or other tax-efficient strategies could reduce your overall tax burden as these changes continue to bite.
- Personal Allowance and Tax Bands Remain Frozen Until 2028
- Dividend Tax Changes April 2026: Higher Rates Across All Bands
- Working From Home Tax Allowance Completely Scrapped
- Making Tax Digital2026: Mandatory for More Businesses
- Capital Gains Tax Allowance Cut in Half
- National Insurance Rates and Thresholds for 2026/27
About the Author
Sarah Mitchell, UK Personal Finance Writer
Sarah has spent over 8 years helping everyday people make sense of their money. She covers taxes, pensions, savings and household bills with a focus on what actually matters to your wallet. Her work is independently researched with no affiliate links or sponsored content.
Frequently Asked Questions
What tax changes are happening in April 2026?
Major changes include frozen personal allowances until 2028, higher dividend tax rates (10%, 35%, 40.6%), scrapped working from home relief, mandatory Making Tax Digital for more businesses, and the capital gains allowance cut to £3,000.
Is the personal allowance changing in 2026/27?
No, the personal allowance remains frozen at £12,570 for the sixth consecutive year. This freeze continues until April 2028, acting as a stealth tax rise as wages increase but tax thresholds don’t.
How much more dividend tax will I pay from April 2026?
Dividend tax rates rise by 1.25 percentage points across all bands. A higher rate taxpayer with £10,000 in dividends will pay £118.75 more tax annually (£9,500 taxable dividends × 1.25% increase).
Is the working from home tax allowance really being scrapped?
Yes, the £6-per-week flat rate allowance (worth £312 annually) is completely removed from 6 April 2026. You can still claim actual proven costs with receipts, but this typically yields much smaller amounts.
When does Making Tax Digital become mandatory?
MTD becomes mandatory from April 2026 for all VAT-registered businesses (regardless of turnover) and self-employed individuals or landlords with income above £30,000. The first quarterly update deadline is 5 August 2026.
MoneyWise UK provides information for general guidance only. This is not financial advice. Always consult a qualified financial adviser before making major financial decisions.
