The 2026/27 tax year updates UK bring a range of changes that could affect your income, investments and overall tax position. As the new tax year approaches, understanding these updates can help you plan ahead and stay compliant.
Income Tax
For the 2026/27 tax year, the personal allowance remains at £12,570. The income thresholds at which higher and additional rate tax begin in England, Wales and Northern Ireland will also stay the same. These thresholds were frozen in the 2025 Budget and are expected to remain unchanged until at least April 2031.
Because allowances are not increasing with inflation, more people may gradually move into higher tax bands as earnings rise.
Scottish Taxpayers
The Scottish Government sets its own income tax rates and bands for non-savings and non-dividend income such as employment income, pensions, self-employment profits and rental income.
From April 2026 the tax rates remain unchanged, although there will be small adjustments to the thresholds for the basic and intermediate bands. Savings and dividend income will continue to follow UK wide rules.
Investment Income and Capital Gains
The dividend allowance remains at £500 for income received outside an ISA. However, tax rates on dividends above this allowance will increase. Basic rate taxpayers will pay 10.75% while higher rate taxpayers will pay 35.75%. The additional rate remains 39.3%.
The Personal Savings Allowance also stays the same. Basic rate taxpayers can earn £1,000 of savings interest tax free each year, while higher rate taxpayers can earn £500 tax free.
ISAs continue to offer tax free income and gains with an annual allowance of £20,000. From April 2027 cash ISA contributions are expected to be limited to £12,000 for individuals under 65, although the total allowance will remain the same.
The Capital Gains Tax annual exemption remains £3,000. Standard CGT rates stay at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. However, the rate for gains qualifying for Business Asset Disposal Relief or Investors Relief will increase to 18% from April 2026.
National Insurance
National Insurance thresholds and rates remain largely unchanged. Most employees will continue to pay 8% on earnings between £12,570 and £50,270 and 2% on earnings above that level.
Employers will continue to pay National Insurance at 15% on earnings above £5,000, and the same rate applies to most employee benefits. Self-employed individuals will continue to pay Class 4 contributions at 6% and 2% across the same thresholds.
Changes Affecting Employees
From April 2026 employers will be able to reimburse employees tax free for certain items they personally pay for, including flu vaccinations, eye tests and home working equipment.
However, employees will no longer be able to claim tax relief from HMRC for additional home working costs. Employers can still reimburse these costs tax free, but if reimbursement is not offered the relief will not be available.
Inheritance Tax
From April 2026 the amount of assets eligible for full Agricultural Relief or Business Relief will be capped at £2.5 million per individual. Assets above this limit will qualify for relief at 50%.
The main Inheritance Tax nil rate band remains frozen at £325,000 until April 2031.
Self-Assessment and Making Tax Digital
There is no longer a PAYE income threshold that automatically requires employees to submit a Self-Assessment tax return. Many employees with simple tax affairs may therefore not need to file one.
April 2026 also marks the first phase of Making Tax Digital for Income Tax. This will apply to individuals with self-employment or property income above £50,000 based on their 2024/25 tax return.
Planning Ahead
The start of a new tax year is a good time to review your PAYE tax code, check eligibility for Marriage Allowance and consider whether the High Income Child Benefit Charge applies.
With several tax changes taking effect from April 2026 and more planned for the coming years, reviewing your position now can help you stay organised and tax efficient.
If you would like help understanding how these changes may affect you, contact the team for more advice. We will be happy to help you plan ahead and keep your tax affairs running smoothly.