The 2026/27 tax year is now underway, and while some key thresholds and allowances remain unchanged, several important updates could still affect how much tax you pay.
With ongoing threshold freezes alongside changes to reliefs, many individuals and business owners may find themselves paying more than expected. Understanding what has changed from 6th April and what it may mean for your finances is key to staying in control and planning effectively for the year ahead.
In this article, we cover the key tax updates for 2026/27 and what these developments may mean for your income, investments and long-term financial planning, including:
- Frozen Income Tax thresholds and personal allowances.
- The expansion of Making Tax Digital (MTD).
- Changes to dividend tax rates.
- Changes to Business Asset Disposal Relief (BADR).
Income Tax thresholds and personal allowance freeze
For the 2026/27 tax year, the main income tax thresholds and personal allowance remain unchanged at the following rates:
| Band | Taxable income | Tax 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 now been frozen since 2021 and are expected to remain unchanged until the 2030/31 tax year.
What does the ongoing freeze mean for me?
As salaries increase over time, whether due to inflation or career progression, frozen tax thresholds mean a growing proportion of income is pushed into higher tax bands. This process, known as fiscal drag, can gradually increase the amount of tax you pay, even though the headline tax rates remain unchanged.
Making Tax Digital (MTD)
Making Tax Digital (MTD) is a government initiative introduced by HMRC to make it easier for individuals and businesses to manage their tax affairs more accurately and efficiently.
As of 6th April 2026, MTD for Income Tax Self-Assessment (ITSA) has now been implemented and will impact individuals who are self-employed and landlords with a combined annual income exceeding £50,000.
Additionally, further expansions are set to be introduced from April 2027, which will impact self-employed individuals and landlords earning over £30,000 per year.
What are the new requirements?
To meet the new MTD requirements, you or your business should now:
- Keep electronic records of all income and allowable expenses.
- Use MTD-compatible software to submit records directly to HMRC.
- Submit updates on a quarterly basis rather than annually and one final end-of-year submission.
What does Making Tax Digital mean for me and my business?
MTD is now a core part of the tax system for many self-employed individuals and landlords. This makes having the correct processes and software in place early essential to ensure you are operating in compliance with the new MTD guidelines.
While many businesses choose accounting software such as QuickBooks or Xero, it is important to note that if you currently maintain records using spreadsheets, you can continue to do so. However, these will need to be linked to compatible software (often referred to as “bridging software”) to enable submission to HMRC.
Dividend Tax Changes
Dividend tax remains a key consideration for business owners and investors in 2026/27. However, as of 6th April 2026, dividend tax rates have now increased by 2% for both basic and higher rate taxpayers:
- Basic rate: 8.75% up to 10.75%.
- Higher rate: 33.75% up to 35.75%.
What does the increase to dividend tax rates mean for me?
The increase in dividend tax rates means that company directors and investors will potentially be subject to an increased tax bill on the same level of income.
For example, a company director receiving £30,000 in dividends would previously have paid £2,625 in tax at 8.75%. However, following the 2% increase the tax liability for this income would rise to £3,225 at 10.75%.
Our expert accountants can review how you extract income from your business, including the balance between salary, dividends and pension contributions, to help ensure your remuneration strategy remains tax efficient and aligned with long-term financial planning.
Business Asset Disposal Relief (BADR)
Business Asset Disposal Relief (BADR) remains one of the most valuable tax reliefs available to UK business owners. This relief allows qualifying gains from the sale of a business or shares in a trading company to be taxed at a reduced Capital Gains Tax (CGT) rate.
However, the CGT rate for qualifying disposals under BADR has now increased to 18% (up from 14%). While this still represents a preferential rate compared to standard CGT, it does mean a higher tax charge on eligible gains compared to previous years.
BADR is subject to a lifetime limit of £1 million, which is the total amount of gains an individual can benefit from at the reduced rate (18%) over their lifetime. Once this limit is reached, any further qualifying disposals will be taxed at the standard CGT rate of 24%.
What does the change to CGT rates mean for me?
While BADR continues to offer valuable tax savings, the increased CGT rate means business owners may now face a higher tax liability when selling a business or shares, particularly if they are close to or have already used their lifetime limit.
As a result, strategic planning is essential to ensure disposals are timed and structured in the most tax-efficient way.
How can Cooper Associates Accountancy help?
With several new measures now in effect, reviewing your tax position early in the year is one of the most effective ways to remain compliant, minimise liabilities, and take advantage of available opportunities.
At Cooper Associates Accountancy, our experienced accountants provide tailored guidance aligned with both your personal and business goals. Whether you are a business owner, investor, or self‑employed individual, we can help you navigate the latest changes with clarity and confidence.
If you would like to understand how the latest updates may affect you or your business, contact us today and discover how we can help you.
