The upcoming tax year, starting from April 6, will bring significant changes that individuals need to be mindful of. Unlike the calendar year, the tax year spans from April 6 to the following April 5, resetting personal tax allowances, ISA limits, and pension allowances.
One notable change is the introduction of new PAYE tax codes for employees. Here are some key changes expected to take effect next month from April 6.
Sole traders and landlords earning over £50,000 annually will soon be mandated to maintain digital records and submit tax updates quarterly starting in April 2026. This new process, known as Making Tax Digital by HMRC, will require the use of compatible software capable of storing income, expenses, VAT information (if VAT-registered), and tax adjustments.
Additionally, adjustments to agricultural and business property reliefs concerning Inheritance Tax will be implemented in April 2026. A new cap of £2.5 million will be set before Inheritance Tax applies, with assets exceeding this threshold eligible for only 50% tax relief. This cap represents an increase from the previous £1 million limit, and the standard Inheritance Tax rate remains at 40%.
Furthermore, the Dividend Tax rate will see an increase from 8.75% to 10.75% for basic rate taxpayers and from 33.75% to 35.75% for higher rate taxpayers following recent announcements in the Budget.
From April 2026, individuals working from home will no longer be able to claim tax relief for additional household costs like gas and electricity. The flat rate work from home allowance in the UK will be £6 per week. Current regulations allow the claim of work from home tax relief only if there is no physical office to work from, excluding those who choose to work remotely.
Lastly, the Capital Gains Tax rate applicable to Business Asset Disposal Relief and Investors’ Relief will rise from 14% to 18% starting April 2026, while the £1 million lifetime limit for these reliefs remains unchanged. This adjustment means that entrepreneurs and investors will face higher tax obligations on qualifying business transactions.