Key Tax Changes Coming in April 2026 — What You Need to Know

harry9206
Mar 30
3 min read

The 2026/27 tax year brings one of the biggest waves of reform the UK has seen in years. Although many of the measures were announced previously, April 2026 is when the rules begin to bite — affecting business owners, landlords, company directors, employees, and anyone involved in succession or profit‑extraction planning.

Below is a clear overview of some of the major changes to be aware of as we head into the new tax year.

Making Tax Digital (MTD) for Income Tax Goes Live

MTD for Income Tax becomes compulsory from April 2026 for:

Self‑employed individuals
Landlords

…with gross income over £50,000 (dropping to £30,000 from April 2027).

Affected taxpayers must use MTD‑compatible software, maintain digital records, and submit quarterly updates. The annual tax return is effectively replaced by year‑round digital reporting.

Restricted Inheritance Tax Relief for Agricultural & Business Assets

From April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) will be subject to a combined £2.5 million cap per individual.

Any qualifying assets above this threshold will receive only 50% relief, creating a potential 20% Inheritance Tax charge. Spouses and civil partners can combine allowances, giving up to £5 million of fully relieved assets between them.

This significantly alters estate planning for landowners and business owners. Reviewing wills, gifting strategies, and ownership structures will become increasingly important.

Business Asset Disposal Relief Becomes More Expensive

The tax rate applied when selling a business is increasing again.

From April 2026, the rate on gains qualifying for Business Asset Disposal Relief (BADR) rises to 18%, while the £1 million lifetime limit remains unchanged.

For context:

A £1 million gain previously generated £100,000 of tax
From April 2026, the same gain will generate £180,000

Those considering an exit or business restructuring should seek advice early.

Dividend Tax Rates Increase

From April 2026, dividend tax rates increase by 2 percentage points:

Basic rate: 10.75%
Higher rate: 35.75%
Additional rate: increased by 2% accordingly

With the dividend allowance frozen at £500, most shareholders and director‑owners will see higher personal tax bills.

Employment Costs Rise Sharply from April 2026

Businesses employing staff will face higher wage bills due to increases in the National Minimum Wage.

Confirmed rates from April 2026:

Age 21+: £12.71 per hour (up from £12.21)
Ages 18–20: £10.85 per hour
Under 18s / Apprentices: £8.00 per hour

This will particularly impact:

Hospitality operators
Retail businesses
Trades and construction firms
Care providers
Seasonal and part‑time employers

Businesses should revisit pricing, staffing models, and cash‑flow forecasts.

Incorporation Relief Will No Longer Be Automatic

From April 2026, incorporation relief — which defers CGT when a business transfers into a company — will only apply if formally claimed on the business owner’s Self Assessment return.

Previously, the relief applied automatically. Missing the claim could now trigger an unexpected and immediate CGT liability.

Tax‑Free Working‑From‑Home Allowance Ends

The simplified £6 per week working‑from‑home allowance will be withdrawn from April 2026.

Employees will only be able to claim actual, evidenced costs, making the relief far less accessible — particularly for professionals and administrative staff who have worked remotely since the pandemic.

Preparing for What Comes Next

Taken together, these reforms will reshape how businesses:

Pass on assets
Report income
Extract profits
Reward staff
Structure operations
Manage costs

With so many changes arriving in one tax year, early preparation is essential.

If you’d like a clear view of what applies to you, get in touch for a free consultation at harry@mackandco.co.uk.