The upcoming tax year is approaching, signaling important changes on the horizon. Unlike the standard calendar year, the tax year spans from April 6 to the following April 5, resetting personal tax allowances, ISA limits, and pension allowances.
With the new tax year commencing on April 6, employees can expect updated PAYE tax codes. Additionally, significant changes are set to take effect from next month.
Sole traders and landlords earning over £50,000 annually will be mandated to maintain digital records and submit tax updates quarterly starting April 2026, under HMRC’s initiative called Making Tax Digital. This entails using compatible software to manage income, expenses, VAT (if applicable), and tax adjustments.
In another tax development for April 2026, adjustments 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 exceeding this threshold receiving only 50% tax relief, up from the previous cap of £1 million. The standard Inheritance Tax rate remains at 40%.
Moreover, the Dividend Tax rates are set to increase for basic and higher rate taxpayers following recent Budget announcements. Dividends refer to the distribution of profits from a company to its shareholders.
Starting April 2026, individuals working from home will no longer be able to claim HMRC tax relief for additional household expenses like gas and electricity. The UK’s work from home allowance stands at a flat rate of £6 per week, applicable only if one lacks a physical office to work from, not for voluntary remote work.
Furthermore, the Capital Gains Tax rate for Business Asset Disposal Relief and Investors’ Relief is slated to rise from 14% to 18% in April 2026, maintaining the £1 million lifetime limit for these reliefs. Entrepreneurs and investors will face higher taxes on eligible business sales.
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