The 2026/27 tax year brings with it some of the most significant changes to affect businesses and individuals in recent years. From higher rates on investment income to reformed reliefs for business owners, the measures announced in the Autumn Budget 2025 will touch almost every taxpayer in some way.
This guide sets out the key changes clearly and, crucially, highlights what you should be doing now to make the most of them.
Personal Tax
- Increase in Tax Rates for Dividend Income: Dividend income earned by individuals in the 2026/27 tax year will be subject to a higher tax rate than the most recent rates. Specifically, the basic and higher tax rates will increase by two (2) percentage points to 10.75% and 35.75% respectively while the additional rate remains at 39.35%. +The tax-free dividend allowance also remains unchanged at £500.
This is particularly relevant for directors of owner-managed businesses who extract profits as dividends, and for investors holding shares outside an Individual Savings Account (ISA).
- Changes to Voluntary National Insurance Contributions (NIC): From 6 April 2026, individuals will no longer be able to pay voluntary Class 2 NIC for periods abroad. Only voluntary Class 3 NIC will be available from the new tax year onwards.
Business Tax
- Change in Capital Allowances: From 6 April 2026 (1 April 2026 for companies), the main rate of writing-down allowance for plant and machinery assets decreases to 14% from 18%. This will result in a reduced pace of write-off of existing assets for tax purposes. To cushion the impact of this change and encourage new investments however, a first-year allowance of 40% for qualifying main rate expenditure was introduced from 1 January 2026. However, cars, second-hand assets and assets for overseas leasing will not be eligible for this new relief.
- Increased Corporation Tax (CT) Penalties: Failure to file CT returns by the due date will now attract a late return penalty of £200 instead of £100. This penalty could see a further increase up to £400 where the CT returns are over three (3) months late (up from £200).
- Making Tax Digital (MTD) for Income Tax: From 6 April 2026, sole traders and landlords in the United Kingdom (UK) with qualifying gross income of £50,000 (based on 2024/25 tax returns) and above are required to file quarterly returns with HMRC. These quarterly returns do not replace the self-assessment tax returns that should be filed with HMRC on or before 31 January annually, as they would only include quarterly summaries of income and expenditure for the sole trader or landlord’s business. The qualifying gross income threshold declines gradually over the next two tax years, meaning that more sole traders and landlords will come under this requirement.
Capital Tax
- Increased Rate for Business Asset Disposal Relief (BADR): Capital Gains Tax (CGT) on disposals that qualify for BADR will now be calculated at 18%. This sees an increase from last year’s rate of 14%. This compares to the standard CGT rate of 18% (basic rate) but will still provide significant savings where higher and additional rate taxpayers will have paid CGT at 24% otherwise. It is worth noting that BADR has now been significantly eroded over recent years, and the rate continues to rise towards the standard CGT rate. Businesses planning a disposal should therefore consider the timing carefully.
- Reduced Rate for Inheritance Tax (IHT) Relief: IHT relief on business and agricultural assets that qualify for the Business Property Relief and Agricultural Property Relief will now be restricted to 100% on the first £2,500,000. Any amounts above the £2,500,000 threshold will only receive a 50% relief for IHT which implies a 20% IHT charge where 40% would otherwise apply. Unused IHT relief in this case can still be transferred between couples and civil partners. This is a notable change for family business owners and farmers, many of whom previously expected to pass on their business or farm entirely free of IHT.
Employment and Reward
- with up to 500 employees and gross assets up to £120,000,000 can now offer tax-advantaged share options to attract and retain key talent since employees are able to pay CGT on share sales instead of the much higher rates of income tax. Previously, this was available to smaller companies with 250 employees and gross assets up to £30,000,000.
- Abolition of Home-Working Tax Relief for Employees: Employees will no longer be able to claim tax relief on additional household costs such as utilities, heating, broadband, etc. incurred from home-working if they are not reimbursed by their employer. This includes the flat rate of £6/week commonly claimed from His Majesty’s Revenue and Customs (HMRC).
- Increase in Company Car Benefit-in-Kind (BIK) Rates: The BIK rates for company cars issued to employees have changed in the new tax year with the rate for electric cars increasing to 4% in 2026/27 and rates for low, moderate, and higher emission cars increasing in subsequent years.
It is well established that early planning consistently delivers better outcomes than reactive decisions made after a tax charge has crystallised. This is especially important with other changes that have been set for future tax years such as: increased property and savings income tax rates, salary sacrifice pension cap for NI relief, electronic Value Added Tax (VAT) invoicing, introduction of a High-Value Council Tax Surcharge on residential properties worth £2,000,000 or more in England, MTD income threshold reductions amongst other changes.
Therefore, whether you are a business owner reviewing your reward structures, a landlord planning for higher property income tax rates, or a sole trader getting to grips with MTD, the key is not to wait. Contact us today on 0151 709 9999 or email info@amyerson.com, to discuss how we can help you through these changes.
