Key tax changes arriving in 2026/27
The cumulative impact of several Budgets will make themselves felt, as the 2026/27 tax year gets underway. Are you ready for the impact?
On income tax, it almost goes without saying that the personal allowance and the thresholds for higher-rate tax and additional-rate tax (top rate in Scotland) will remain the same.
Income tax changes
Dividend tax
Unless you are an additional-rate taxpayer, the rate of tax you pay on any dividends above the dividend allowance (frozen at £500) will rise by two percentage points in 2026/27. That means if you are a UK basic-rate taxpayer, your dividend tax rate will be 10.75%, while if you are a UK higher-rate taxpayer a 35.75% rate will apply. Additional-rate taxpayers and most trustees will continue to pay a 39.35% dividend tax rate.
Tax administration
After many delays, Making Tax Digital (MTD) for income tax starts on 6 April. For 2026/27, you will be within its scope if:
- You are self-employed, a landlord or both;
- Your combined self-employment income and rental income (both before deductions for expenses) was more than £50,000 in the 2024/25 tax year; and
- You are not eligible for any of the strictly limited exemptions.
MTD for income tax, requires affected taxpayers to use HMRC approved software to submit quarterly income and expenses returns, with the first due by 7 August 2026. Penalty points will apply for late returns, although points will be waived in year one.1 That concession may reflect the compliance issues which HMRC is anticipating.
Income tax relief for venture capital trust investments (VCTs)
Investment in VCTs will only attract 20% income tax relief from 2026/27, down from the previous 30%. While the size of companies that VCTs can invest in will double, the reduced relief could make Enterprise Investment Schemes (EISs), which retain 30% tax relief, relatively more attractive depending on your circumstances.2
Company cars
The scale charge on most company cars will rise by one percentage point. It may feel more dramatic than that if, like many company car drivers, you have an electric car (0g/km CO2), as that 1% translates into a one third increase in tax.3
Capital taxes changes
Here again the main exemptions remain frozen, alongside some changes:
Inheritance tax (IHT) reliefs
The contentious reforms to agricultural and business IHT reliefs came into full effect on 6 April 2026, limiting the value that qualifies for 100% relief to a combined £2,500,000 per individual, with any excess qualifying for 50% relief, and cutting relief on AIM-listed shares to 50%. While the changes have been watered down from the original proposals, they could still have a significant impact if you are a farmer or business owner.
Capital gains tax (CGT)
There is no change to the main rates of CGT, but there is an increase to the rate on gains that qualify for business assets disposal relief from 14% to 18% in 2026/27.
If any of these changes could affect you, the sooner you seek advice on what action you can take, the better.
The Financial Conduct Authority does not regulate tax advice. Tax treatment varies according to individual circumstances and is subject to change.
The value of the investment and the income from it can fall as well as rise and investors may not get back what they originally invested.
Past performance is not a reliable indicator of future performance.
Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.
Sources
1 UK Government | Sign up for Making Tax Digital for Income Tax
3 UK Government | Future rates for petrol powered and hybrid powered company cars
May Bulletin 2026
This insight is part of our May Bulletin 2026. Explore all the articles:
