The upcoming tax year is approaching, bringing significant changes that individuals should take note of. Unlike the calendar year, the tax year runs from April 6 to April 5 of the following year, resetting personal tax allowances, ISA limits, and pension allowances.
New PAYE tax codes for employees are also on the horizon, with various changes set to take effect from April 6. Sole traders and landlords earning over £50,000 annually will need to maintain digital records and submit tax updates quarterly starting in April 2026 under HMRC’s Making Tax Digital initiative.
Moreover, alterations to agricultural and business property reliefs for Inheritance Tax are scheduled for April 2026. Notably, a new cap of £2.5 million will be introduced before Inheritance Tax is applicable, with only 50% tax relief for assets exceeding this threshold – an increase from the previous £1 million cap.
Furthermore, the Dividend Tax rate is set to increase from 8.75% to 10.75% for basic rate taxpayers and from 33.75% to 35.75% for higher rate taxpayers following announcements in the Budget. Additionally, individuals working from home will no longer be eligible to claim tax relief for extra household costs like gas and electricity starting April 2026.
Lastly, the rate of Capital Gains Tax for Business Asset Disposal Relief and Investors’ Relief will rise from 14% to 18% from April 2026, maintaining the £1 million lifetime limit for these reliefs, leading to higher tax payments for entrepreneurs and investors on qualifying business sales.