Type and hit Enter to search
📍 Quick Answer — TL;DR
The 2026/27 tax year is defined by aggressive revenue-raising through stealth. Income tax bands are frozen until 2031, dragging an estimated 5.2 million people into paying income tax for the first time. The National Living Wage has risen to £12.71/hour, compressing business margins at every level. Dividend Tax has risen by 2 percentage points effective April 2026. MTD for Income Tax is now legally mandatory for sole traders and landlords earning over £50,000. And a series of confirmed future changes — Cash ISA cap in 2027, property income surcharge in 2027, council tax surcharge in 2028, salary sacrifice NI cap in 2029 — mean the planning window is narrower every year.
🟣 NLW £12.71/hour from April 2026 — full-time minimum wage workers now cost employers £24,784/year gross before NI and pension contributions.
🟣 Dividend Tax up 2%: Basic Rate 10.75%, Higher Rate 35.75% from April 2026. With the £500 allowance unchanged, company owner-managers must restructure remuneration now.
🟡 Five confirmed future changes from 2027–2029 create an urgent three-year planning window. 2026/27 is the last year before multiple relief structures are curtailed.
📋 IN THIS GUIDE
UK Tax News & Updates 2026/27: Budget Fallout, Wage Hikes, Dividend Surcharges & HMRC's Digital Revolution
The 2026/27 tax year was defined at the Autumn Budget — and the strategy is unmistakable: raise revenue without touching headline rates. Freeze thresholds. Lift wage floors. Hike investment taxes. Mandate digital compliance. The result is a tax burden that grows in real terms every year without a single rate change on the face of the legislation.
This tracker covers every confirmed tax change for 2026/27 and all announced future changes through to April 2029 — with direct links to the detailed guide for each topic where planning action is needed.
🔔 FOUR TAX CHANGES IN 2026/27 THAT REQUIRE IMMEDIATE ATTENTION
📊 Fiscal drag is accelerating — 5.2 million new taxpayers by 2031
Every pay rise, bonus, or rental income increase now pushes more of your income into a higher band — with no relief from threshold movement until 2031. The OBR projects 5.2 million people newly paying income tax and 4.8 million existing taxpayers crossing into Higher or Additional Rate bands before the freeze ends.
💼 NLW £12.71 — employers must audit payroll immediately
The 4.1% increase adds nearly £900/year per full-time minimum-wage employee in gross salary alone — before the knock-on increase in Employer NI (15%) and mandatory auto-enrolment pension contributions. Businesses with multiple minimum-wage workers face significant payroll cost increases that must be absorbed or passed on immediately.
📈 Dividend Tax 10.75%/35.75% — company owner-managers must act now
The 2-percentage-point hike on Basic and Higher Rate dividend income is immediate from 6 April 2026. With the Dividend Allowance at just £500, limited company owners who pay themselves primarily via dividends face a materially higher effective tax rate. Remuneration structure review is no longer optional.
🕐 2026/27 is the last full planning year before five confirmed changes hit
Cash ISA cap (2027), property income tax hike (2027), high-value council tax surcharge (2028), EV excise duty (2028), salary sacrifice NI cap (2029). Every one of these changes diminishes a current relief or increases a current tax. 2026/27 is the peak planning window — and it is running out.
The 2026/27 Tax Landscape: Revenue Without Rate Rises
The Treasury's fiscal strategy for this Parliament is now fully legible: raise revenue without altering headline rates of Income Tax, National Insurance, or VAT. The mechanism is structural rather than visible — freeze thresholds, hike allowances slowly, increase compliance costs, and let inflation and wage growth do the tax-raising work silently. For taxpayers, this means every pay rise is partly a tax rise, every investment return is taxed more heavily, and every new compliance obligation narrows the gap between legitimate planning and unintentional breach.
📋 The defining principle of 2026/27 tax policy: HMRC has unparalleled real-time visibility into earnings through Making Tax Digital, payroll RTI, and open banking data flows. The era of the annual January reconciliation — where errors could be smoothed and planning done retrospectively — is over. Compliance is now continuous, and so must planning be.
Budget Changes: The "Stealth Tax" Extension to 2031
🚨 The OBR's projected impact of the freeze
The Office for Budget Responsibility projects that continuing this freeze will drag 5.2 million additional people into paying Income Tax and push 4.8 million existing taxpayers into the Higher or Additional Rate bands by April 2031. Neither group will receive a letter from HMRC informing them. Their first indication will be a larger-than-expected tax deduction from payroll, or an unexpected Self Assessment bill.
Who is most at risk from fiscal drag in 2026/27
Earners approaching £50,270 — crossing into 40%
A salary of £48,000 in 2026 only needs a 4.7% pay rise to cross the Higher Rate threshold — with no corresponding rise in the £50,270 floor to absorb the move. Salary increases, overtime, or a bonus can silently push you over.
Earners near £100,000 — entering the 60% trap
The £100k Personal Allowance taper zone (60% effective marginal rate) remains at £100,000–£125,140 with no movement planned. Promotions, dividends, and investment income can drag earners into this zone without warning. The Pension Pivot is the primary remedy — see our Tax Planning guide.
Landlords and self-employed with growing income
Rising rents and growing trading revenue push gross qualifying income above the £50,000 MTD threshold, the £50,270 Higher Rate threshold, and potentially the £100,000 PA taper — three separate cliff edges with no upward indexation to cushion the crossing.
📋 Full analysis: The exact mechanics of Income Tax bands, the 60% PA taper, and all thresholds for 2026/27 are covered in depth in our Income Tax Guide 2026/27.
The April 2026 NLW Spike: What £12.71/Hour Means for Every Employer's Payroll
The April 2026 minimum wage rises represent one of the largest single-year payroll cost increases in recent history. For businesses employing workers at or near the minimum wage floor — retail, hospitality, care, cleaning, logistics — the compounding effect of higher base wages, increased Employer NI liability, and higher auto-enrolment pension contributions creates an immediate margin pressure that requires operational response.
The April 2026 minimum wage rates — full table
The full business burden — cascading cost pressures
Employer NI at 15% — unchanged but compounding
The Employer NI rate remains at 15% following the October 2025 Budget increase. Because NLW has risen 4.1%, the NI bill on minimum-wage workers rises in proportion — adding ~£120/year per full-time worker in NI alone above the increase in gross salary.
Auto-enrolment pension contributions rise in line
Mandatory minimum employer pension contributions (3% of qualifying earnings between £6,240 and £50,270) rise automatically with the NLW increase. For businesses with many minimum-wage workers, this is a material addition to the total cost per head.
Pay differential compression — morale risk
Experienced staff earning above the NLW may expect pay rises to maintain differentials. A business that only lifts its lowest-paid workers by 4.1% risks compressing pay bands across the structure, with knock-on effects on recruitment and retention at all levels.
📋 For employer obligations, payroll tax, and Employer NI strategy: see our Income Tax Guide for the full NI rate structure, and our Tax Planning & Strategies Guide for salary sacrifice and remuneration restructuring options that reduce employer NI exposure.
Dividend Hike & ISA Cap: The Dual Threat to Investor Returns in 2026/27
Investors face a two-front squeeze in 2026/27: higher taxes on investment income today, and a confirmed cap on how that income can be sheltered tax-free from April 2027. The combination rewards those who act in the current tax year and penalises those who wait.
The 2% Dividend Tax hike — effective from 6 April 2026
💼 The impact on company owner-managers
The dominant remuneration strategy for owner-managed limited companies — small salary to the NI threshold, maximum dividends to extract remaining profits — is now materially more expensive. A director extracting £50,000 in dividends above the allowance as a Higher Rate taxpayer pays £1,000 more in Dividend Tax in 2026/27 than in 2025/26 from this change alone.
Review your remuneration mix: spousal dividend transfers, pension contributions via the company, and salary/dividend balance should all be reassessed. See Tax Planning & Strategies.
The impending Cash ISA cap — act before April 2027
🚨 CONFIRMED CHANGE: Cash ISA cap from April 2027
From 6 April 2027, adults under 65 will be limited to depositing a maximum of £12,000 into Cash ISAs per year. The remaining £8,000 of the £20,000 annual ISA allowance must be placed in a Stocks & Shares ISA, Innovative Finance ISA, Lifetime ISA, or other qualifying type.
⚠️ Savings & property income: 2% hike confirmed for April 2027
The Budget also confirmed a further 2-percentage-point increase in tax rates on property income and savings income across all bands from April 2027. Basic Rate on property income will rise from 20% to 22%. Higher Rate will rise from 40% to 42%. Landlords and savers have a 12-month window in 2026/27 to maximise their ISA shelter and review rental income structuring before these rates activate.
✅ What to do now: maximise this year's £20,000 ISA allowance — including the full Cash ISA if you prefer capital security — and explore the Bed & ISA strategy to migrate taxable brokerage holdings inside the wrapper. Full guidance in our Smart Savings Hub and Capital Gains Tax guide.
The £2.5m IHT Business Relief Cap: Decades of Succession Planning Rewritten from April 2026
The most structurally significant IHT change in a generation is now live. Business Property Relief (BPR) and Agricultural Property Relief (APR) — which previously offered unlimited 100% IHT exemption on qualifying assets — are now subject to a £2.5 million combined cap. Assets above this threshold face a 20% effective IHT rate for the first time.
What has changed and what it means for estates
✅ The silver lining: spousal transferability
The £2.5m BPR/APR cap is fully transferable between spouses and civil partners on first death — identical to the Nil Rate Band. A married couple can therefore pass up to £5 million of qualifying business or agricultural assets at 100% relief to their heirs. Combined with the NRB (£325k × 2) and RNRB (up to £175k × 2), couples with qualifying businesses can potentially shelter over £6 million from IHT entirely.
🚨 Who is most urgently affected: farming families with growing land valuations, owner-managers of established trading companies valued above £2.5m per individual, holders of AIM shares, and any individual whose existing succession plan assumed unlimited BPR/APR relief. Plans structured before April 2026 must be reviewed immediately — they may now result in IHT liabilities that did not previously exist.
The response strategies available now
Start the 7-year PET clock immediately
Gifts to individuals (Potentially Exempt Transfers) that are survived by 7 years fall outside the estate entirely — and are not subject to the £2.5m cap. A business interest gifted today and survived by 7 years is fully IHT-free, regardless of value. Every year of delay is a year of exposure added.
Trust structures — freeze today's valuation
A discretionary trust holding qualifying business assets can freeze the estate at today's value — future growth occurs outside the taxable estate. Requires specialist legal and tax advice but provides a powerful long-term vehicle for growing businesses.
Annual gifting — small, compounding, no 7-year clock
£3,000 per individual (£6,000 per couple) per year is immediately exempt from IHT — no survival period required. £250 per person to any number of recipients is also exempt. Consistent annual gifting builds into a meaningful IHT reduction over time.
Full analysis of the £2.5m cap, spousal transferability strategies, lifetime gifting mechanics, and trust structures is covered in our Tax Planning & Strategies Guide.
MTD Is Here: Making Tax Digital Is Now a Legal Obligation — Not a Pilot Programme
As of 6 April 2026, Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) is a legal reality for the first wave of mandated taxpayers. After years of delays and pilots, Phase 1 mandation is in force. The shoebox of receipts and the January spreadsheet are not just inefficient — they are now non-compliant.
Phase 1 mandation — what is required from April 2026
🔵 MTD FOR ITSA — WHAT IS NOW MANDATORY
Who is in: sole traders and landlords whose combined gross income from self-employment and property exceeded £50,000 in the 2024/25 tax return
Digital records required: every income and expense transaction must be recorded in HMRC-approved MTD software — not a spreadsheet or manual ledger
Quarterly updates: four income and expense summaries per year — due August, November, February, May
Final Declaration by 31 January 2028: the full reconciliation replacing the Self Assessment return — no soft landing on this deadline
🚨 Soft landing is NOT a free pass: HMRC has announced no financial penalties for late quarterly updates in 2026/27 — but penalty points still accrue. Four missed deadlines puts you at the 4-point threshold entering 2027/28, where the first missed deadline triggers a £200 fine. The maximum penalty for inadequate digital records is £3,000 — fully enforced now.
The three-wave mandation rollout to 2028
📋 Key facts for 2026 mandation
HMRC determines your 2026 entry based on your 2024/25 Self Assessment — check your return now if unsure
Your PAYE salary does not count toward the £50,000 qualifying income threshold
HMRC will not enrol you automatically — you must choose approved software and authorise sign-up yourself
Complete MTD compliance guide — all deadlines, approved software, points-based penalties, digital record requirements, and the soft landing details: HMRC Rules & Compliance Guide.
Corporate & Business Tax Updates: New Capital Allowances, Writing Down Cuts and EOT Relief Halved
Beyond the payroll pressures of the NLW increase, the Budget introduced three significant changes to business tax that affect capital investment decisions, historic asset deductions, and business exit planning via Employee Ownership Trusts.
40% First-Year Capital Allowance — Leased & Unincorporated Assets
A new 40% First-Year Allowance applies from January 2026 to assets previously excluded from the Full Expensing regime — specifically assets acquired with the intention of being leased and assets purchased by unincorporated businesses (sole traders and partnerships).
Who benefits most: vehicle and equipment leasing companies, sole traders investing in plant and machinery, and partnerships making capital purchases previously denied enhanced relief.
⚠️ This is a 40% first-year allowance — not 100% full expensing. The remaining 60% of the asset cost enters the standard capital allowance pool for writing-down over subsequent years.
Main Rate Writing Down Allowance Cut: 18% → 14%
The standard Writing Down Allowance (WDA) on the main rate capital allowances pool has been cut from 18% to 14% from April 2026. This slows the rate at which businesses can deduct the cost of existing plant and machinery from taxable profits.
Who is most affected: businesses holding significant historic expenditure in the main rate pool — where full expensing was not claimed at the time of purchase. The speed of deduction on that pool value has just decreased, increasing the number of years required to fully write off the remaining expenditure.
💡 This change offsets the cost to Treasury of the new 40% First-Year Allowance above — a give on future investment, a take on past expenditure.
Employee Ownership Trust CGT Relief: 100% → 50%
Qualifying disposals to an Employee Ownership Trust (EOT) previously attracted 100% CGT exemption — making the EOT one of the most tax-efficient exit routes for business owners who wanted to sell to their workforce. This exemption has been halved to 50%. The remaining 50% of gain on an EOT disposal is now taxed at standard CGT rates (18%/24%).
The planning implication: EOT exits completed before the April 2026 change may still qualify for the full 100% exemption. Owners who have been planning an EOT sale should take specialist advice immediately on whether timing the completion before the change preserves full relief.
📋 CGT rates applicable to the 50% taxable portion: see our Capital Gains Tax guide for the full 2026/27 rate structure.
Looking Ahead: The Five Confirmed Changes Arriving 2027–2029
The government's strategy of announcing painful changes years in advance creates both a planning opportunity and a ticking clock. Every confirmed future change below represents either a relief being curtailed or a new tax being introduced — and each one makes 2026/27 the optimal year to act within the current regime before the window closes.
UK Tax News 2026/27 FAQs
Direct answers to the most frequently asked questions about the 2026/27 tax changes — rates, thresholds, compliance obligations, and what is coming next.
What is the National Living Wage in 2026?
What is the National Living Wage in 2026?
The National Living Wage for workers aged 21 and over increased to £12.71 per hour from 6 April 2026 — a rise of 4.1%. For 18–20-year-olds: £10.85/hour (+8.5%). For 16–17-year-olds and apprentices: £8.00/hour (+6.0%).
📊 Annual gross cost per full-time NLW worker (37.5h/week): £24,784 in salary, plus ~£2,968 Employer NI at 15%, plus ~£576 minimum pension = total employer cost of approximately £28,328 per worker before any other employment-related costs.
What are the UK Dividend Tax rates in 2026/27?
What are the UK Dividend Tax rates in 2026/27?
From 6 April 2026, Dividend Tax rates increased by 2 percentage points for Basic and Higher Rate taxpayers. Basic Rate: 10.75% (was 8.75%). Higher Rate: 35.75% (was 33.75%). Additional Rate: 39.35% — unchanged. Dividend Allowance remains at £500.
🚨 Impact on company owner-managers: A director extracting £50,000 in dividends above the allowance as a Higher Rate taxpayer pays £1,000 more in 2026/27 than in 2025/26. Review remuneration structure — spousal dividend transfers, salary/dividend balance, and company pension contributions should all be reassessed.
Are UK income tax thresholds changing in 2026/27?
Are UK income tax thresholds changing in 2026/27?
No — all major Income Tax thresholds are frozen in 2026/27 and will remain frozen until 5 April 2031. Personal Allowance: £12,570. Higher Rate Threshold: £50,270. Additional Rate Threshold: £125,140.
🚨 Fiscal drag effect: The OBR projects this freeze will drag 5.2 million additional people into paying Income Tax and push 4.8 million existing taxpayers into Higher or Additional Rate bands by 2031. Every pay rise, bonus, or rental income increase moves more of your income into higher tax territory with no relief from threshold movement.
For the full band structure and how to mitigate fiscal drag, see our Income Tax Guide 2026/27.
Is Making Tax Digital mandatory in 2026?
Is Making Tax Digital mandatory in 2026?
Yes — MTD for Income Tax is legally mandatory from 6 April 2026 for sole traders and landlords with qualifying gross income over £50,000. HMRC bases the 2026 entry decision on your 2024/25 Self Assessment return.
⚠️ The soft landing reality: HMRC will not levy financial penalties for late quarterly updates in 2026/27 — but penalty points accrue from day one. Four missed deadlines puts you at the 4-point fine threshold entering 2027/28. The £3,000 maximum penalty for inadequate digital records is fully enforced immediately.
Complete guide: HMRC Rules & Compliance 2026/27 — all deadlines, software options, and penalty details.
What is the £2.5m BPR cap and how does it affect business owners?
What is the £2.5m BPR cap and how does it affect business owners?
From April 2026, Business Property Relief (BPR) and Agricultural Property Relief (APR) are no longer unlimited. 100% relief applies only to the first £2.5 million of combined qualifying business and agricultural assets. Values above this face a 20% effective IHT rate — a charge that did not previously exist.
✅ The spousal advantage: The £2.5m cap is fully transferable between spouses. A married couple can pass up to £5 million at 100% relief — and combined with Nil Rate Bands and the Residence NRB, potentially over £6 million with zero IHT.
⚠️ For estates above £2.5m: start the 7-year PET clock now — lifetime gifts to individuals (Potentially Exempt Transfers) that are survived by 7 years are fully IHT-free and are NOT subject to the £2.5m cap. See the full planning guide: Tax Planning & Strategies.
What is changing about Cash ISAs from April 2027?
What is changing about Cash ISAs from April 2027?
From 6 April 2027, adults under 65 will be capped at £12,000/year in Cash ISA deposits — down from the current £20,000. The remaining £8,000 must go into Stocks & Shares ISA, IFISA, Lifetime ISA, or another qualifying type. Over-65s are exempt. Existing balances are fully protected.
🚨 The window closes on 5 April 2027: 2026/27 is the last year for under-65s to shield a full £20,000 in cash. The allowance cannot be backdated once the new tax year begins. If you prefer cash security over market investment, use this year's full allowance before the window closes permanently.
Every Change in This Tracker Has a Dedicated Deep-Dive Guide
The news tells you what has changed. The guides tell you what to do about it. Explore every topic below.
FULL HUB
UK Tax Hub — 2026/27 Overview
Every UK tax type in one place — the master guide for all 2026/27 rates, thresholds, and obligations.
INCOME TAX
Income Tax Guide 2026/27
Frozen PA at £12,570, HRT at £50,270, the 60% PA taper at £100k — complete band mechanics and fiscal drag impact.
CGT
Capital Gains Tax 2026/27
£3,000 AEA, 18%/24% equalised rates, BADR at 18%, EOT relief halved, and 60-day property deadline.
HMRC COMPLIANCE
HMRC Rules & MTD Guide
MTD software, all 5 quarterly deadlines, points-based penalty ladder, and digital record-keeping requirements.
STRATEGIES
Tax Planning & Strategies
Beat the 60% trap, use the last £20k Cash ISA, IHT lifetime gifting, and salary sacrifice before 2029.
TOOLS
Calculators & Tools
Model your exact 2026/27 tax liability with live NLW rates, new dividend rates, and frozen band calculations.
The Government Is Raising Revenue Without Changing Rates. Every Inaction Is a Tax Rise.
Frozen thresholds mean your pay rise is partly a tax rise. A higher dividend rate means your company profits cost more to extract. The £2.5m IHT cap means your succession plan may be obsolete. MTD means HMRC has more visibility into your income than ever before. And five confirmed changes between now and 2029 make 2026/27 the single best year to act within the current regime.
📌 IMMEDIATE PRIORITY ACTIONS FROM THIS TRACKER
Employers: audit payroll immediately for NLW compliance. Check all workers aged 21+ are receiving at least £12.71/hour from 6 April 2026. Review the total cost impact including Employer NI and pension contributions and adjust pricing or operational models accordingly.
Company directors: review dividend remuneration. With Basic Rate at 10.75% and Higher Rate at 35.75%, assess spousal dividend transfers, salary/dividend balance adjustment, and company pension contributions to offset the 2% hike.
Investors: use the full £20,000 Cash ISA before 5 April 2027. This is the last year for the full allowance in cash. From April 2027 the cap drops to £12,000 for under-65s — permanently.
Business owners and farmers above £2.5m: act on the IHT cap now. Start the 7-year PET clock on qualifying assets above the cap. Engage specialist advice on trust structures and annual gifting strategy before values grow further.
£50k+ earners: MTD sign-up is not automatic — do it now. Choose approved software, connect it to your Government Gateway, and begin importing 2026/27 transactions immediately. The first quarterly deadline is 7 August 2026.
TaxYZ provides educational information only and is not regulated by the FCA or ICAEW. All rates, thresholds, wage floors, and legislative announcements reflect information published by HMRC and HM Treasury as of April 2026. Future changes are presented as announced by the government and are subject to legislative confirmation. This page does not constitute tax, legal, or financial advice. Consult a qualified professional before acting on any information contained here.