UK Tax Changes 2026/27: What Changed From 6 April 2026

The 2026/27 UK tax year, which runs from 6 April 2026 to 5 April 2027, brought four changes that most people will feel: dividend tax rose by two percentage points to 10.75% and 35.75%, Business Asset Disposal Relief moved to 18%, Making Tax Digital for Income Tax became mandatory for sole traders and landlords with qualifying income over £50,000, and 100% inheritance tax relief on business and agricultural property is now capped at £2.5 million. Income tax thresholds did not change and are now frozen until 5 April 2031. Higher tax on savings and property income, and inheritance tax on unused pensions, are already law but do not start until April 2027.

Key takeaways

In force from 6 April 2026: dividend ordinary and upper rates of 10.75% and 35.75% (the additional rate stays at 39.35%), an 18% Business Asset Disposal Relief rate, carried interest taxed as income rather than as a gain, and the £2.5 million cap on 100% agricultural and business property relief.
Unchanged but frozen: the £12,570 personal allowance, the £37,700 basic rate band and the £50,270 higher rate threshold stay at these levels until 5 April 2031.
Making Tax Digital for Income Tax is live for qualifying income over £50,000. The threshold falls to £30,000 from 6 April 2027 and £20,000 from 6 April 2028.
Enacted for later years: savings income rates of 22%, 42% and 47% from 6 April 2027, new separate property income rates at the same levels from April 2027, and unused pension funds counting towards inheritance tax for deaths on or after 6 April 2027.
Employer National Insurance stays at 15% above a £5,000 secondary threshold, with an Employment Allowance of £10,500.
The next Budget is on 28 October 2026, so anything not yet legislated can still change.

The 2026/27 changes at a glance

Most of these measures were announced at Budget 2025 on 26 November 2025 and are now in the Finance Act 2026, which received Royal Assent on 18 March 2026. The table separates what applies today from what is enacted for a later year.

|---|---|---|---|

| Dividend rates: 10.75% (ordinary) and 35.75% (upper); 39.35% additional unchanged | Company owners, shareholders with dividends outside ISAs and pensions | 6 April 2026 | In force |

| 100% APR/BPR limited to £2.5 million, 50% relief above; transferable between spouses | Owners of farms, trading businesses and unlisted shares | Deaths from 6 April 2026 | In force |

| Temporary non-residence: close-company dividends received abroad taxable on return | People who leave the UK and return within the TNR period | Returns from 6 April 2026 | In force |

Income tax: rates unchanged, thresholds frozen until 2031

Nothing moved in the headline structure for 2026/27. Per GOV.UK, the personal allowance is £12,570, the 20% basic rate runs to £50,270, the 40% higher rate to £125,140 and the 45% additional rate applies above that. The allowance is withdrawn by £1 for every £2 of adjusted net income above £100,000.

Scotland sets its own bands on earned income, with six rates from 19% to 48% in 2026/27 (HMRC rates and thresholds).

The more important point is how long this lasts. Budget 2025 extended the freeze on the personal allowance and the £37,700 basic rate limit to 5 April 2031, and the policy paper on maintaining the thresholds confirms that the matching National Insurance thresholds (the £12,570 primary threshold and lower profits limit, and the £50,270 upper earnings and upper profits limits) are held too.

A frozen threshold is a tax rise by stealth. Each pay rise that is not matched by a threshold increase pushes more income into the 40% band and, for those between £100,000 and £125,140, into the 60% effective marginal rate created by the allowance taper. The government's own policy paper expects the extension to bring around 700,000 more people into income tax by 2030/31.

Dividend tax: two points higher from 6 April 2026

This is the change that most affects owner-managed companies. From 6 April 2026, the dividend ordinary rate rose from 8.75% to 10.75% and the dividend upper rate from 33.75% to 35.75%, according to HMRC's policy paper. The additional rate stays at 39.35%, and the dividend allowance remains £500. The new rates apply UK-wide, including Scotland.

Dividends inside an ISA or pension remain outside the charge.

Worked example: a director on salary and dividends

Take a director in England who pays herself a salary of £12,570 and dividends of £40,000 in 2026/27, with no other income. The salary uses up her personal allowance, so all £40,000 of dividends sits in the taxable bands.

1. The first £500 is covered by the dividend allowance and taxed at 0%, but it still uses up part of the £37,700 basic rate band.

2. The next £37,200 falls within the basic rate band and is taxed at 10.75%: £3,999.00.

3. The remaining £2,300 falls above the basic rate band and is taxed at 35.75%: £822.25.

4. Total dividend tax for 2026/27: £4,821.25.

The same dividends under the 2025/26 rates of 8.75% and 33.75% would have cost £3,255.00 plus £776.25, or £4,031.25. The two-point rise adds £790 to her bill, which is simply 2% of the £39,500 of dividends that exceed the allowance. Salary and dividends interact with employer National Insurance and corporation tax too, so the right mix has to be modelled as a whole. Our UK tax calculator will run the numbers for your own figures.

Savings and property income: higher rates from April 2027

Budget 2025 also raised tax on savings and property income, but a year later than dividends. The technical note confirms the following:

Savings income rates rise from 20%, 40% and 45% to 22%, 42% and 47% from 6 April 2027. This applies UK-wide.
Property income gets its own separate rates of 22%, 42% and 47% from 6 April 2027 in England, Wales and Northern Ireland. Scotland and Wales are to be given the power to set their own property rates.
Finance cost relief for residential landlords will be given at the 22% property basic rate.
Ordering changes. The personal allowance and other reliefs must be set against employment, trading and pension income first, then property, then savings, then dividends.

For 2026/27, interest and rental profits are still taxed at 20%, 40% and 45%. Because of the ordering rule, more savings and rental income will fall into the new rates from 2027/28, so ISA use and how property is held are worth reviewing before April 2027.

Making Tax Digital for Income Tax is now live

From 6 April 2026, sole traders and landlords whose qualifying income was over £50,000 in 2024/25 must keep digital records and send quarterly updates to HMRC through compatible software. HMRC's guidance sets out the phases:

| Qualifying income in | Above | Must use MTD from |

|---|---|---|

| 2024/25 | £50,000 | 6 April 2026 |

| 2025/26 | £30,000 | 6 April 2027 |

| 2026/27 | £20,000 | 6 April 2028 |

Qualifying income is your total self-employment and property income before expenses, which is turnover rather than profit. A landlord with £35,000 of rent and £20,000 of costs therefore counts £35,000 and will be in scope from April 2027 if that was the 2025/26 figure.

For the standard update periods, quarterly updates are due by 7 August, 7 November, 7 February and 7 May. The first deadline, 7 August 2026, has already passed.

HMRC has also begun signing people up automatically. From September 2026 it is enrolling sole traders and landlords whose 2024/25 qualifying income was over £50,000 and who have not joined themselves. If that is you, you will need to confirm your details, get compatible software and catch up any quarterly updates you have missed.

Steps to take if you are in scope

1. Check your qualifying income from your 2024/25 return (and your 2025/26 return for the April 2027 phase).

2. Choose HMRC-recognised software, or bridging software if you keep records in a spreadsheet.

3. Sign up through your HMRC online account before HMRC does it for you.

4. Move your records to a digital format from the start of the period and reconcile them to your bank.

5. Diary the four quarterly deadlines alongside your Self Assessment dates. Our UK and US deadline calendar sets them out.

6. If you believe you are digitally excluded, apply for an exemption rather than simply not filing.

Capital gains and Business Asset Disposal Relief

Main capital gains tax rates are unchanged in 2026/27, at 18% within the basic rate band and 24% above it, and the annual exempt amount remains £3,000 (GOV.UK CGT rates). The change is to relief on selling a business.

Business Asset Disposal Relief was 14% for disposals between 6 April 2025 and 5 April 2026 and is 18% for disposals from 6 April 2026. The relief's value now lies in charging 18% where a higher-rate taxpayer would otherwise pay 24%: £30,000 on a qualifying £500,000 gain.

Carried interest also moved out of capital gains tax. From 6 April 2026 it is taxed under income tax and National Insurance rather than as a gain.

National Insurance and employers

Employer National Insurance was the large change of April 2025. For 2026/27 the position is steady: employers pay 15% on earnings above a secondary threshold of £5,000 a year, and the Employment Allowance is £10,500. Employees pay 8% between £12,570 and £50,270 and 2% above that (HMRC rates and thresholds for employers 2026 to 2027).

The next change is further out. From April 2029, only the first £2,000 a year of employee pension contributions made through salary sacrifice will be free of employee and employer National Insurance. Income tax relief on those contributions is unaffected.

Inheritance tax: business, farm and pension changes

Agricultural and business property relief (from 6 April 2026)

From 6 April 2026, 100% relief applies only to the first £2.5 million of combined agricultural and business property, with 50% relief above that. This was raised from the originally announced £1 million in December 2025. HMRC's APR and BPR changes page confirms that:

any unused allowance can pass to a surviving spouse or civil partner, so a couple can shelter up to £5 million;
shares traded on markets that are not "listed", such as AIM, get 50% relief;
tax on all APR and BPR property can be paid in ten equal annual instalments, interest-free;
a separate £2.5 million allowance applies to relievable property held in trusts.

The nil-rate band of £325,000 and the residence nil-rate band of £175,000 are also frozen until 5 April 2031.

Pensions enter the estate (from 6 April 2027)

For deaths on or after 6 April 2027, most unused pension funds and death benefits will count towards the value of the estate. Death-in-service benefits and dependants' scheme pensions from defined benefit schemes are excluded, and pensions left to a spouse, civil partner or charity stay exempt. Personal representatives, not pension scheme administrators, will be liable for reporting and paying the tax. Expression-of-wish forms and drawdown plans are worth reviewing before then.

Leaving and returning to the UK

The temporary non-residence rules were tightened for people returning on or after 6 April 2026. The "post-departure trade profits" exception has been removed, so all dividends from a close company received while temporarily non-resident become taxable in the UK on return. Our residency checker helps with the first question: whether you are UK resident at all.

If you are a US citizen living in the UK

The United States taxes its citizens on worldwide income wherever they live, so every UK change above also has a US angle.

Dividends and interest cannot be excluded. The foreign earned income exclusion covers earned income only. UK dividends, interest and rental profits are reported on the US return and relieved, if at all, through the foreign tax credit on Form 1116.
Higher UK tax means more credit available. The rise in dividend rates, and the savings and property rates from April 2027, increase the UK tax you can credit against US tax on the same income. The credit is designed to stop the same income being taxed twice in full, so a higher UK rate tends to reduce any residual US tax on that income rather than add a second layer. It does not reduce the UK bill itself.
Excluded income cannot carry a credit. If you exclude salary under Form 2555, you cannot also claim a credit for UK tax on that salary. The choice between the two is worth re-running whenever UK rates move.
Two tax years. The UK year runs from 6 April; the US year is the calendar year, so UK tax must be matched to the right US year.
MTD applies to you as a UK taxpayer. US citizenship makes no difference to Making Tax Digital. If you have UK self-employment or rental income over the threshold, the quarterly regime applies alongside your US return, which for those living abroad has an automatic extension to 15 June.
Estate planning runs on two systems. The UK inheritance tax changes to pensions and business relief apply to your UK estate position. Any US estate tax exposure is separate and needs reviewing alongside it.

Our US-UK expat tax accountant service is built for this overlap.

Common mistakes to avoid

Assuming last year's salary and dividend split still works. It was optimised for 8.75%. Re-run it at 10.75%, including employer National Insurance.
Ignoring the April 2027 savings and property rates because they are "next year". The planning window, such as ISA use and ownership changes, is this tax year.
Measuring MTD against profit. The test is gross income before expenses.
Waiting for HMRC to write. Automatic sign-up does not excuse missed quarterly deadlines.
Assuming the old unlimited APR/BPR still applies. Relief above £2.5 million is now 50%, AIM shares get 50% throughout, and wills written around 100% relief may need revisiting.
Acting on rumours before the 28 October 2026 Budget. Announcements are not law until they are legislated. Plan on enacted rules and keep options open.

What to watch next

The Chancellor has confirmed that the next Budget will be on 28 October 2026. Future rates can still change; we will update this guide afterwards. The UK country guide covers the wider regime.

When to get professional help

If you draw income from your own company, let property, plan to sell a business or have a pension that may now fall into your estate, the 2026/27 and 2027/28 changes are worth modelling rather than estimating. An ACCA-qualified accountant reviews and signs off every UK return we prepare, and an IRS Enrolled Agent does the same on the US side for Americans in the UK. This guide is general information, not advice for your circumstances. If you would like the numbers run for you, you can book a consultation.

Sources

Frequently asked questions

What changed for UK taxpayers on 6 April 2026?+

From 6 April 2026 the dividend ordinary and upper rates rose to 10.75% and 35.75%, Business Asset Disposal Relief rose to 18%, carried interest moved into income tax, and Making Tax Digital for Income Tax became mandatory for sole traders and landlords with qualifying income over £50,000. 100% inheritance tax relief on agricultural and business property is now limited to £2.5 million, with 50% relief above. The personal allowance and income tax bands did not change.

What are the UK dividend tax rates for 2026/27?+

For 2026/27 the dividend ordinary rate is 10.75%, the upper rate is 35.75% and the additional rate is 39.35%. The ordinary and upper rates each rose by two percentage points from 6 April 2026, while the additional rate is unchanged. The dividend allowance remains £500, and dividends inside an ISA or pension are not taxed. The rates apply across the whole UK, including Scotland.

How long are UK income tax thresholds frozen?+

The personal allowance of £12,570 and the basic rate limit of £37,700, which together give a higher rate threshold of £50,270, are frozen until 5 April 2031. Budget 2025 extended the freeze by three years and the Finance Act 2026 legislated it. The matching National Insurance thresholds are held at the same levels. Frozen thresholds mean pay rises pull more income into higher bands over time.

When do the higher tax rates on savings and property income start?+

They start on 6 April 2027, not in 2026/27. Savings income rates rise to 22%, 42% and 47% across the UK. Property income gets separate rates of 22%, 42% and 47% in England, Wales and Northern Ireland, and landlords' finance cost relief will be given at 22%. The personal allowance will also be set against employment, trading and pension income first. The changes are in the Finance Act 2026.

Who has to use Making Tax Digital for Income Tax?+

Sole traders and landlords whose qualifying income, meaning total self-employment and property income before expenses, was over £50,000 in 2024/25 have had to use it since 6 April 2026. The threshold falls to £30,000 from 6 April 2027 and £20,000 from 6 April 2028. You keep digital records and send quarterly updates by 7 August, 7 November, 7 February and 7 May. From September 2026 HMRC is signing up those who have not joined.

What is the Business Asset Disposal Relief rate in 2026/27?+

Business Asset Disposal Relief is 18% for qualifying disposals made on or after 6 April 2026, up from 14% for disposals between 6 April 2025 and 5 April 2026. The main capital gains tax rates are 18% within the basic rate band and 24% above it, and the annual exempt amount is £3,000. The relief now mainly benefits higher-rate taxpayers, who would otherwise pay 24% on the gain.

Will my pension be subject to inheritance tax?+

For deaths on or after 6 April 2027, most unused pension funds and pension death benefits will be included in the value of the estate for UK inheritance tax. Death-in-service benefits and dependants' scheme pensions from defined benefit arrangements are excluded, and pensions passing to a spouse, civil partner or charity remain exempt. Personal representatives will be responsible for reporting and paying any tax. The rule is in the Finance Act 2026.

How do the 2026/27 UK changes affect a US citizen living in the UK?+

US citizens are taxed on worldwide income, so UK dividends, interest and rent also go on the US return. The foreign earned income exclusion covers only earned income, so these are usually relieved through the foreign tax credit on Form 1116. Higher UK rates increase the UK tax available to credit, while UK rules such as Making Tax Digital apply regardless of citizenship. UK and US tax years differ, so timing matters.