With 2026 arriving, most people will experience changes to their tax and financial affairs.
Understanding what’s changing helps you plan properly and avoid unnecessary tax bills. In some cases, small changes can make a massive difference to your finances and plans for the years ahead.
Let’s jump right into it and assess what’s different in 2026 for individuals and families.
Dividend Tax Rises: April 2026
From April 2026, dividend tax rates increase by 2%.
This affects anyone receiving dividends, whether you’re a company director taking dividends from your own limited company, a shareholder in your family business, or an investor holding dividend-paying shares outside tax-protected accounts.
The rates change like this:
- Basic rate taxpayers: 8.75% rises to 10.75%
- Higher rate taxpayers: 33.75% rises to 35.75%
- Additional rate: Stays at 39.35% (unchanged)
- Dividend allowance: Remains frozen at £500
For company directors taking £25,000 in dividends as a higher rate taxpayer, the annual tax bill rises by £490. Someone receiving £10,000 in dividends from an investment portfolio faces an extra £190 annually.
Protecting Your Dividends
The dividend tax increase only affects dividends received outside Individual Savings Accounts (ISAs) or pensions. Dividends within these tax-protected accounts remain completely tax-free.
Consider the “bed and ISA” strategy. Sell investments held in a general account and immediately repurchase them within an ISA wrapper. You’ll face Capital Gains Tax on any profits above your £3,000 annual exemption when you sell, but future dividends and growth are then tax-free.
The £20,000 annual ISA allowance for 2026/27 stays unchanged. If you’re not using your full ISA allowance, prioritise dividend-paying stocks. From April 2027, the cash ISA limit drops to £12,000 for under-65s, but the stocks and shares ISA allowance remains £20,000.
Making Tax Digital: April 2026
From April 2026, Making Tax Digital (MTD) for Income Tax Self-Assessment begins.
If you’re self-employed or a landlord with combined income over £50,000, you’ll need to keep digital records and submit quarterly updates to HMRC using approved software.
Who Needs to Comply?
MTD affects you if your gross income (before expenses) from self-employment and property exceeds certain thresholds:
- April 2026: £50,000 or more
- April 2027: £30,000 or more
- April 2028: £20,000 or more
The £50,000 threshold applies to combined income. If you’re self-employed earning £30,000 and have rental income of £25,000, your combined £55,000 means you must comply from April 2026.
What Changes Under MTD
MTD replaces the annual Self-Assessment with quarterly reporting. Instead of a single tax return in January, you’ll submit updates four times per year to reflect your income and expenses. The traditional 31 January deadline remains for the final declaration and payment.
You’ll need MTD-compatible software to submit your quarterly updates. Free and low-cost options exist, though many find accounting software like Xero, QuickBooks, or FreeAgent works well. The quarterly deadlines fall one month after each quarter ends.
No late submission penalties apply during the first year (2026/27), giving everyone time to adjust. From April 2027, a points-based penalty system starts.
Income Tax Thresholds: Frozen Until 2031
Income tax thresholds remain frozen until April 2031. This creates “fiscal drag” where pay rises push more of your income into higher tax bands, even though the bands themselves haven’t moved.
Here’s what stays frozen:
- Personal allowance: £12,570
- Higher rate threshold: £50,270
- Additional rate threshold: £125,140
When thresholds don’t rise, but wages do, you pay more tax on the same real income.
State Pension Catches Up
From April 2026, the full new state pension rises to £241.30 weekly, or £12,548 annually.
That’s just £22 below the personal allowance. Anyone receiving the full state pension and any other income over £22 per year now pays income tax.
This catches many pensioners with small private pensions, part-time work, rental income, or savings interest above £22 annually. From 2027, when the state pension rises again, even those with only state pension income will likely pay tax for the first time.
Capital Gains Tax: High Rates Continue
Capital gains tax rates remain at their elevated levels for 2026/27:
- Lower rate: 18%
- Higher rate: 24%
- Annual exemption: £3,000
Compare this to a few years ago when the annual exemption was £12,300, and the rates were 10%/20%.
The combined effect of reduced exemptions and higher rates has led to a dramatic increase in CGT bills.
Business Asset Disposal Relief (BADR) Changes
If you’re selling a business or business assets, Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) will increase from 14% to 18% from April 2026. This relief applies to the first £1 million of qualifying gains over your lifetime when selling all or part of a business.
The 18% rate is still better than the standard 24% higher rate, but it’s double what the relief offered just two years ago when the rate was 10%.
National Living Wage Rises: April 2026
The National Living Wage increases to £12.71 per hour from April 2026, up from £12.21. This is a 4.1% increase that affects around 2.4 million workers.
For someone working full-time (37.5 hours per week), this means an extra £977 per year. However, with the personal allowance frozen and more income becoming taxable, the full benefit gets reduced by tax.
Other minimum wage rates also increase:
- Ages 18-20: £10.85 per hour (up from £10.00)
- Ages 16-17 and apprentices: £8.00 per hour (up from £7.55)
These changes particularly affect younger workers, with the 18-20 rate increasing by 8.5% as the government works toward a single adult wage rate.
Inheritance Tax: Agricultural and Business Property Relief Capped
From April 2026, one of the most substantial inheritance tax changes in years takes effect.
Agricultural Property Relief (APR) and Business Property Relief (BPR), which have allowed family businesses and farms to pass down tax-free for decades, are being capped at £1 million per person.
Here’s how it works:
- First £1 million: Full 100% relief (no inheritance tax)
- Above £1 million: Only 50% relief (effective 20% IHT rate instead of 0%)
- Married couples: Can transfer unused allowances for up to £2 million combined relief
- AIM shares: BPR reduced from 100% to 50% (no £1m threshold – just straight 50% relief)
This affects business owners, farmers, and AIM investors. Someone with a £3 million family business now faces £400,000 in inheritance tax where previously they’d have paid nothing. The good news is you can pay this over 10 years interest-free.
The £1 million allowance is transferable between spouses, even if the first death occurred before April 2026. This means a couple can protect £2 million of combined agricultural and business assets.
How Double Point Can Help
The personal tax changes hitting in 2026 affect everyone differently. Your dividend strategy, ISA planning, MTD preparation, and retirement income approach depend on your specific situation.
At Double Point, our chartered accountants work with individuals, families, and investors to understand the practical impact of these changes and identify opportunities within the new rules.
We help with personal tax planning and self-assessment filing, ISA and pension strategies given the new rates, MTD setup and quarterly compliance for the self-employed and landlords, and year-round support rather than just annual tax returns.
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 and the steps you should take before April 2026.