It’s 2026, and if you run a business, this year brings more tax changes than any in recent memory.
Understanding what’s changing and what you need to do about it determines whether you pay thousands more in taxes or structure your affairs efficiently.
Let’s get right into it and overview 2026’s greatest tax changes.
Making Tax Digital Arrives: April 2026
If you’re self-employed or a landlord with qualifying income over £50,000, April 2026 is when Making Tax Digital (MTD) becomes mandatory for you.
MTD requires three things: compatible software to keep your records, quarterly updates to HMRC, and a final declaration at year-end.
The quarterly updates don’t change when you pay tax (still 31 January), but they change how you track your income and expenses throughout the year. You need digital records, maintained continuously, not paper receipts sorted annually.
What Qualifying Income Means
The £50,000 threshold is based on your turnover, not profit.
For sole traders, it’s your total business income before expenses. For landlords, it’s your gross rental income before costs. If you turned over £55,000 but only made £20,000 profit, you’re still caught by MTD.
This catches more people than expected. A plumber earning £60,000 is on MTD, even if they only net £30,000 after materials and expenses. A landlord with three properties generating £18,000 in rent each is on MTD, even if mortgage interest and costs mean they barely break even.
The Software and Quarterly Reporting
Compatible software isn’t optional. HMRC requires it. The popular options are Xero, QuickBooks, and FreeAgent, but there are dozens of others.
Every three months, you submit a summary of your income and expenses for that period. The software generates this based on your records. You review it, check it’s accurate, and submit it to HMRC. If everything’s up to date, this takes 15-30 minutes. If you’ve fallen behind on record-keeping, it takes hours.
The quarters don’t align with calendar quarters. They follow your accounting year. If you use the standard tax year (6 April to 5 April), your quarters end on 5 July, 5 October, 5 January, and 5 April. Each update is due within a month of the quarter end.
Around 780,000 sole traders and landlords must join MTD from April 2026. A further 970,000 join in April 2027 when the threshold drops to £30,000. By April 2028, it reaches £20,000.
April 2026: Business Property Relief (BRR) Gets Restricted
The other major change this April is the restriction on Business Property Relief (BPR) for Inheritance Tax (IHT).
If you own a family business, farm, or substantial AIM shareholdings, succession planning just became far more complicated and expensive.
Previously, qualifying business assets passed to the next generation free of IHT, regardless of value. A £5 million business could pass down with zero IHT. That’s finished.
From April 2026, only the first £1 million of combined business and agricultural assets receives 100% relief. Everything above that gets 50% relief, meaning an effective 20% IHT rate on the excess.
The Numbers
The impact depends entirely on your business value. For smaller businesses under £1 million, nothing changes. For anything larger, the bills can be substantial:
- £3 million business: First £1m tax-free, remaining £2m faces 20% IHT = £400,000 bill
- £5 million business: First £1m tax-free, remaining £4m faces 20% IHT = £800,000 bill
- £10 million business: First £1m tax-free, remaining £9m faces 20% IHT = £1.8 million bill
The £1 million allowance is per person and transferable between spouses, so married couples can shelter £2 million in total.
But for many family businesses worth several million, this still leaves substantial exposure. And unlike property or investments, businesses can’t easily be sold piece by piece to raise cash for the tax bill.
The AIM Share Problem
AIM shares took an even bigger hit. They now receive only 50% relief, regardless of value, with no £1 million allowance.
The effective IHT rate on AIM shares is 20% from the first pound. Investors who bought AIM shares specifically for IHT planning need to completely reconsider their strategy.
Dividend Tax Rates Rise: April 2026
This one hits limited company owners hard.
From April 2026, dividend tax rates increase by 2 percentage points. If you take income from your company as dividends, you’re now paying more tax on almost every pound. The rates change as follows:
- Basic rate: 8.75% → 10.75%
- Higher rate: 33.75% → 35.75%
- Additional rate: 39.35% (unchanged)
- Dividend allowance: Stays at £500
For company directors taking £30,000 dividends annually, the increase costs around £586. For those taking £75,000, it’s over £1,400 extra. These aren’t trivial amounts, and they compound year after year.
The Salary vs Dividend Calculation Changes
The increase in dividend taxes changes the optimal salary-dividend mix for company owners.
Previously, dividends were almost always more tax-efficient than salary once you’d used your personal allowance. Now it’s more complex, and the answer depends on your company’s corporation tax rate (19% or 25%) and your personal tax band.
For companies paying 19% corporation tax, dividends remain slightly more efficient for basic rate taxpayers.
For companies paying 25% corporation tax, salary and dividends are nearly equal for higher rate taxpayers. The calculations are intricate, and getting them wrong costs thousands.
Business Asset Disposal Relief (BADR): Rates Rise Again
BADR sees its rate increase again this April. The rate went from 10% to 14% in April 2025. From April 2026, it rises to 18%. That’s the final increase announced, but it fundamentally changes the tax impact of selling a business.
For larger business sales, the impact scales proportionally. The relief is still valuable compared to the standard 24% CGT rate, but it’s nowhere near as generous as it was.
What Qualifies for BADR
BADR applies to qualifying business disposals, which means:
- Selling shares in your personal trading company where you own at least 5%
- Selling a business you run as a sole trader or partner
- Selling assets after closing your business
- You must have owned the business for at least two years before sale
The £1 million lifetime limit remains unchanged, but the rate increase means each pound of that limit is now worth less.
Incorporation Relief: Now Requires Active Claim
From April 2026, the government announced that Incorporation Relief no longer applies automatically.
If you’re transferring your sole trader or partnership business into a limited company, you now need to actively claim the relief when filing your self-assessment tax return.
Previously, if you met the conditions, the relief applied automatically and rolled your business gain into your new company shares.
Now you need to claim it explicitly, provide supporting calculations, and submit them with your return. Miss the claim, and you lose the relief entirely, potentially creating a substantial CGT bill on the business transfer.
Other 2026 Changes That Affect Businesses
Several other changes take effect this year that affect specific types of businesses or situations. They’re less headline-grabbing than MTD or BPR, but they still matter if they apply to you:
- VCT income tax relief decreases from 30% to 20% from the 2026/27 tax year. If you invest in Venture Capital Trusts, your upfront tax relief is now lower, though the increased investment limits (rising to £10 million, or £20 million for knowledge-intensive companies) provide more capacity.
- Capital allowances change with main rate writing-down allowances reducing from 18% to 14% from April 2026 (for corporation tax) and 6 April 2026 (for income tax). Full expensing remains available for qualifying assets, but assets not covered by full expensing now get slower write-downs.
- National Living Wage increases to £12.71 per hour from April 2026 (up from £12.21), with corresponding increases for younger workers and apprentices. If you employ people on minimum wage, this increases your payroll costs on top of the employer NI rise from last April.
- Economic crime levy bands and charges change proposed from 1 April 2026, affecting regulated businesses. HMRC also gets enhanced powers against tax advisers who facilitate non-compliance.
How Double Point Can Help
The changes hitting businesses in 2026 affect everyone differently. Your MTD obligations, dividend strategy, and succession planning depend on your specific situation.
At Double Point, our chartered accountants work with companies, sole traders, partnerships, and landlords to understand the practical impact of these changes and identify opportunities within the new rules.
We help with MTD preparation and ongoing compliance; business valuations and IHT exposure calculations; dividend vs. salary optimisation given the new rates; succession planning, and year-round support, not just annual accounts.
With over 36 years of combined expertise, we’ve helped clients through numerous tax changes.
Book a free consultation with Double Point to discuss how these changes affect you, whether you need MTD preparation now or next year, what your potential IHT exposure looks like, how to optimise your salary-dividend mix with the new rates, and what actions make sense before April’s changes fully bite.