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2026/27 Tax Year started 6 April 2026. All figures confirmed from HMRC, GOV.UK, Autumn Budget 2025, and Finance Act 2026. The new UK tax year began on 6 April 2026. While there are no dramatic headline changes to income tax rates, a significant number of thresholds, allowances and rules have shifted — many quietly increasing your tax burden through frozen thresholds and rising rates on investment income. Quick Reference: 2026/27 Key FiguresIncome Tax — Still Frozen, Still SqueezingThe personal allowance and all income tax thresholds remain frozen at 2021 levels until April 2031 after Chancellor Rachel Reeves extended the freeze by three years at Budget 2025. With wages rising with inflation, more earners are being dragged into the basic and higher rate bands each year without any change in headline tax rates — a process known as fiscal drag. Dividend Tax — Rates Up From 6 AprilThe most immediate cash impact for investors and company directors. Basic rate dividend tax rises from 8.75% to 10.75%; higher rate from 33.75% to 35.75%. The £500 allowance is unchanged. See our full dividend tax guide for worked examples and what to do. Making Tax Digital — Now Mandatory for £50k+ EarnersFrom 6 April 2026, MTD for Income Tax is mandatory for self-employed individuals and landlords with gross income over £50,000. You must use HMRC-compatible software to maintain digital records and submit quarterly income and expense summaries. The threshold drops to £30,000 from April 2027. No late-submission penalties will be charged in the first year (2026/27); the penalty regime starts from April 2027. Inheritance Tax — Frozen Thresholds, New BPR/APR CapBoth the Nil Rate Band (£325,000) and Residence Nil Rate Band (£175,000) are frozen until April 2031. More significantly, from 6 April 2026 the full 100% IHT relief available under Business Property Relief (BPR) and Agricultural Property Relief (APR) is now capped at a combined £2.5 million per individual (£5 million for couples). Assets above this threshold receive only 50% relief, resulting in an effective IHT rate of 20% on the excess. This change particularly affects family farms and private businesses. ISA — No Change for 2026/27, but Plan for 2027The full £20,000 ISA allowance applies for 2026/27, including to cash ISAs. The £12,000 cash ISA limit for under-65s announced in the Autumn Budget 2025 does not take effect until April 2027. This means 2026/27 is the last tax year in which under-65s can contribute the full £20,000 to a cash ISA — worth planning around. National Living Wage — Up 4%The National Living Wage for workers aged 21 and over rises from £12.21 to £12.71 per hour from 1 April 2026 — a 4% increase. Workers aged 18–20 see a larger proportional rise, from £10.00 to £10.85/hour. For employers, this adds to the cost pressures from the April 2025 employer NI changes (rate at 15%, threshold at £5,000) which remain in place. This article is for informational purposes only and does not constitute financial advice. Always verify rates and rules with official sources before making any financial decision. Frequently Asked QuestionsHas the personal allowance changed for 2026/27? No. The personal allowance remains frozen at £12,570 for 2026/27. The freeze has now been extended to April 2031, meaning no inflationary uprating for at least five more years. What is the income tax rate for 2026/27? Income tax rates are unchanged: 20% basic rate (£12,571–£50,270), 40% higher rate (£50,271–£125,140), 45% additional rate (above £125,140). Thresholds are frozen until 2031. What is Making Tax Digital and does it affect me? Making Tax Digital (MTD) for Income Tax is now mandatory from 6 April 2026 for self-employed individuals and landlords with gross income over £50,000. If this applies to you, you must use HMRC-compatible software to keep digital records and submit quarterly updates. What is the pension annual allowance for 2026/27? The pension annual allowance remains £60,000 for 2026/27, unchanged from last year. You can contribute up to this amount across all your pension pots and receive tax relief at your marginal rate. Has the ISA allowance changed for 2026/27? For 2026/27 the overall ISA allowance remains £20,000. The planned reduction of the cash ISA limit to £12,000 for under-65s does not take effect until April 2027 — so this tax year, you can still put the full £20,000 into a cash ISA. Sources: HMRC, GOV.UK, Finance Act 2026, Autumn Budget 2025 (HM Treasury), AJ Bell, Fidelity UK, Morningstar UK, Armstrong Watson. |
UK 2026/27 Tax Year Changes — Every Update That Affects Your MoneyThe 2026/27 UK tax year started 6 April 2026. Dividend tax has risen, MTD is now mandatory for £50k+ earners, IHT business relief is capped at £2.5m, and income tax thresholds remain frozen to 2031. Full breakdown. Read More |
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