The upcoming tax year is set to begin soon, ushering in significant changes worth noting. Unlike the standard calendar year, the tax year spans from April 6 to the subsequent April 5, resetting personal tax allowances, ISA limits, and pension allowances.
One notable change on the horizon is the issuance of new PAYE tax codes for employees. Here are some key updates expected 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. This will require compatible software capable of storing income, expenses, VAT (if applicable), and tax adjustment information.
In April 2026, alterations to agricultural and business property reliefs for Inheritance Tax purposes will be implemented. Notably, there will be a new £2.5 million cap before Inheritance Tax applies, with assets beyond this threshold receiving only 50% tax relief, up from the previous £1 million cap. The standard Inheritance Tax rate remains at 40%.
Additionally, 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 recent Budget announcements.
From April 2026, individuals working from home will no longer be eligible to claim tax relief for additional household expenses, such as gas and electricity. The UK’s current work from home allowance stands at a flat rate of £6 per week, applicable only if there is no traditional office to work from, not for remote work preferences.
Moreover, the Capital Gains Tax rate affecting Business Asset Disposal Relief and Investors’ Relief is scheduled to rise from 14% to 18% as of April 2026. Despite this change, the £1 million lifetime limit for these reliefs remains in place, resulting in higher tax obligations for entrepreneurs and investors on qualifying business sales.