April 1, 2026
April 2026 marks the start of a new tax year, bringing with it a series of tax changes that will quietly but significantly reshape the tax landscape for individuals and businesses.
At first glance, many of the headline rates appear unchanged. However, beneath the surface, the combined effect of frozen thresholds, increased rates on investment income, and tighter reliefs means that the overall tax burden is rising. In parallel, compliance expectations are becoming more demanding. The message is clear. Planning ahead is no longer optional; it is essential.
Income tax: more tax without increasing the rates.
The personal allowance remains at £12,570, and the higher rate threshold stays at £50,270. While this stability may appear reassuring, it masks the ongoing impact of fiscal drag.
As wages increase, more individuals are being pulled into higher tax bands. This results in a higher effective tax rate without any formal increase in headline rates. Over time, this subtle shift can have a meaningful impact on take-home income.
Dividend income is also becoming more heavily taxed. From 6 April 2026, dividend tax rates will rise by 2%. With the dividend allowance remaining at just £500, even relatively modest portfolios are now likely to generate a tax liability.
Looking ahead, the position becomes more pronounced. From April 2027, further increases are planned for savings and rental income, extending the pressure on investment returns.
Making Tax Digital: a fundamental shift in reporting.
From April 2026, Making Tax Digital for Income Tax becomes mandatory for self-employed individuals and landlords with a turnover over £50,000.
This represents a significant change in how taxes are reported. Digital record keeping and quarterly submissions will replace the traditional annual return. For many, this will require new systems, new processes and a different approach to financial management.
The scope of Making Tax Digital will widen in the coming years, with thresholds reducing to £30,000 and then £20,000. Acting early will ensure a smoother transition and reduce the risk of disruption.
Capital gains tax: a more costly exit.
For business owners and investors, the cost of disposing of assets is increasing.
From April 2026, the capital gains tax rate applying to Business Asset Disposal Relief and Investors’ Relief will rise to 18%. While the £1 million lifetime allowance remains unchanged, the tax payable on qualifying gains has increased significantly.
This makes the timing of disposals and the structuring of transactions more important than ever.
In addition, incorporation relief is expected to move to a claim-based approach rather than being automatically applied. This introduces additional administrative requirements and reinforces the need for careful planning.
Inheritance tax: reliefs becoming more limited.
Inheritance tax planning is becoming more complex and more important.
From April 2026, Business Property Relief and Agricultural Property Relief will be capped at a combined £2.5 million per individual for full relief. Assets above this threshold will only qualify for 50% relief, creating an effective inheritance tax charge of 20% on the excess.
For couples, up to £5 million can still be protected with effective planning. However, achieving this outcome will require a more structured and proactive approach.
There are also further changes expected in relation to AIM-listed shares, adding another layer of consideration for those using these investments as part of their estate planning.
Corporation tax: increased focus on compliance.
While the main corporation tax rate changes have already taken effect in previous years, April 2026 introduces a tougher approach to compliance.
Late filing penalties for corporation tax returns will increase significantly, with higher penalties for repeated delays. In addition, rising interest rates on late payments mean that the cost of falling behind is materially higher.
For businesses, this places greater emphasis on strong internal processes, accurate record keeping and timely reporting.
National Insurance: small changes with real impact.
National Insurance thresholds remain aligned with income tax, continuing the effect of fiscal drag.
For the self-employed, Class 2 and Class 3 contribution rates are increasing, making it more expensive to maintain a full contribution record. There are also tighter rules around voluntary contributions for those working or living abroad.
While these changes may appear modest in isolation, they contribute to a broader increase in the overall tax burden.
Enterprise Management Incentive scheme: a positive development.
Amid the tightening landscape, there is some welcome news for growing businesses.
From April 2026, the Enterprise Management Incentive scheme is being expanded. More companies will qualify, and existing limits are being increased. Share option limits are doubling, employee thresholds are rising, and option periods are being extended.
This creates a valuable opportunity for businesses to attract, retain and incentivise key people in a tax-efficient way.
What should you be doing now?
The direction of travel is clear. Higher effective taxation and stricter compliance requirements are becoming the norm.
Taking a proactive approach now can make a significant difference. Reviewing how income is structured, revisiting business exit and succession plans, and ensuring systems are ready for Making Tax Digital are all important steps.
At Hentons, we believe that strong relationships underpin better outcomes. We work closely with our clients to provide clarity, confidence and control in an increasingly complex tax environment.
If you would like to understand what these changes mean for you, and how best to respond, we are here to help.
