The upcoming tax year brings significant changes that individuals need to be aware of. Unlike the calendar year, the tax year runs from April 6 to April 5 the following year, resetting personal tax allowances, ISA limits, and pension allowances.
Starting April 2026, sole traders and landlords with an annual income exceeding £50,000 will have to maintain digital records and submit tax updates quarterly as part of HMRC’s Making Tax Digital initiative. This requires using compatible software to store income, expenses, VAT (if applicable), and tax adjustments.
Inheritance Tax will see adjustments in April 2026, with a new cap of £2.5 million before tax applies. Assets exceeding this amount will have only 50% tax relief, up from the previous cap of £1 million, with the standard Inheritance Tax rate remaining at 40%.
Changes announced in the Budget will raise the Dividend Tax rate for basic rate taxpayers from 8.75% to 10.75% and for higher rate taxpayers from 33.75% to 35.75%. Additionally, individuals working from home will no longer be eligible for tax relief on extra household costs like gas and electricity starting April 2026.
Furthermore, the Capital Gains Tax rate for Business Asset Disposal Relief and Investors’ Relief will increase from 14% to 18% in April 2026, affecting entrepreneurs and investors who will pay more tax on qualifying business sales.