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The 2026–27 tax year is upon us!
We’ve put together this guide to give you an overview of some key rules and changes that may affect how much tax you pay and what you need to do to stay compliant.
From 6 April 2026 there are several changes, and a number of existing rules will continue, which together will affect your tax position. Some of the most important points we think all our clients should be aware of are:
Income tax thresholds frozen until at least April 2031
The personal allowance, personal savings allowance and the basic, higher and additional rate bands are frozen at their 2025–26 levels until at least 5 April 2031. Over time, this is likely to bring more people into higher tax bands.
Dividend tax rates increase from 6 April 2026
From 6 April 2026, the basic and higher rate dividend tax rates increase to 10.75% and 35.75% respectively, while the additional rate remains at 39.35%.
State pension age and NIC
State pension age is scheduled to increase to, 67 phased in from 6 April 2026. When you reach state pension age, your employee (primary) National Insurance contributions (NIC) usually stop, but your employer’s (secondary) NIC may still be due. You should check your own state pension age and NIC position, as the detailed timetable is set by separate pensions legislation.
Voluntary NIC while working abroad becomes more restricted
From the 2026–27 tax year, you will generally no longer be able to pay voluntary Class 2 NIC for periods spent abroad. Voluntary Class 3 NIC while abroad will only be available if you have at least 10 years of continuous UK residence or UK NIC. There are limited exceptions (for example, certain self employed people covered by international agreements and some volunteer development workers).
Digital platform reporting is fully in force
Platforms such as taxi apps, food delivery apps and short term letting sites must now collect information about sellers and report income to HMRC, as well as provide you with a summary. These rules started on 1 January 2024 and continue into 2026–27, greatly increasing HMRC’s visibility of “side hustles” and small businesses.
VAT and Brexit
UK VAT is now a standalone system, but it is still interpreted in the light of its EU origins. Northern Ireland keeps special rules for goods under the Northern Ireland Protocol. This can create VAT registration and compliance obligations in Northern Ireland even where the same activity in Great Britain would not trigger registration.
Individuals – Self Assessment, landlords, investors
If you are a landlord, an investor or someone who needs to complete a Self Assessment tax return, this section is for you.
1. Income tax bands and allowances - Personal allowance and bands frozen
The personal allowance, personal savings allowance and the basic, higher and additional rate thresholds have been frozen until at least 5 April 2031.
In practice, for 2026–27 this means:
Personal allowance - 0% on the first £12,570 of income.
Basic rate - 20% on taxable income up to £37,700.
Higher rate - 40% on taxable income from above £37,700 to £125,140.
Additional rate - 45% on taxable income above £125,140.
If your “adjusted net income” is more than £100,000, your personal allowance is reduced by £1 for every £2 of income over £100,000. By the time your income reaches £125,140 or more, your personal allowance is fully withdrawn.
2. Scottish taxpayers
If you live in Scotland, or are planning to move there, you may become a Scottish taxpayer. This depends on where you live, not where you work.
If you are a Scottish taxpayer, Scottish income tax rates apply to your earnings, pensions and property income.
UK wide rates still apply to your savings and dividend income.
From 2026–27, the Scottish thresholds are due to change, but the rates remain the same. The announced bands (subject to ratification by the Scottish Parliament) are:
Personal allowance - 0% on the first £12,570 of income.
Starter rate - 19% on taxable income between £12,571 – £16,537
Scottish basic rate - 20% on taxable income between £16,538–£29,526
Intermediate rate - 21% on taxable income between £29,527–£43,662
Higher rate - 42% on taxable income between £43,663 to £75,000
Advanced rate - 45% on taxable income between £75,001 - £125,140
Top rate - 48% on taxable income above £125,140
If your income exceeds £100,000, your personal allowance is still tapered away in the same way as for the rest of the UK.
3. Dividends
From 6 April 2026, the dividend tax rates change as follows:
Ordinary rate (within the basic rate band): 10.75%.
Upper rate (within the higher rate band): 35.75%.
Additional rate: 39.35% (unchanged).
The dividend tax free allowance is currently £500 per tax year. It is reasonable to expect this to continue, but it could be changed by a future Budget.
These changes may affect you if you are:
an investor with share portfolios, outside stocks and shares ISAs; or
a director and/or owner manager taking profits from a company as dividends.
4. Property and savings income
The following changes have been announced for the 2027–28 tax year (they are not in force for 2026–27 but are useful for planning):
Savings income: from 6 April 2027, the basic, higher and additional rates on savings income are expected to rise to 22%, 42% and 47% respectively.
Property income (England and Wales): from 6 April 2027, the basic, higher and additional rates on property income are also expected to rise to 22%, 42% and 47%.
These are future measures and could be altered by later Budgets, but they are important to bear in mind for tax planning for 2027–28 and beyond.
5. Working abroad and National Insurance
If you go to work in a country that does not have a social security agreement with the UK, you and your employer may continue to pay UK Class 1 NIC for up to 52 weeks if:
You are ordinarily resident in the UK;
You were resident in the UK immediately before taking the job abroad; and
Your employer has a place of business in the UK.
If those conditions are not met, your UK NIC may stop when you leave the UK.
From the 2026–27 tax year onwards:
In most cases you will not be able to pay voluntary Class 2 NIC for periods abroad, except in limited situations (for example, some self employed people covered by international agreements and certain volunteer development workers).
To pay voluntary Class 3 NIC while abroad, you will need at least 10 years of continuous UK residence or UK NIC.
These changes can significantly affect your state pension and contribution record if you plan long periods overseas, so advice before departure is strongly recommended.
6. State pension age and stopping employee NIC
Employee (primary) Class 1 NIC usually stops when you reach state pension age. Employer (secondary) NIC may still be due on your earnings.
State pension age is scheduled to increase to 67, phased in from 6 April 2026. You should check your own state pension age on the government website, as the detailed timetable is set by pensions legislation.
If you are an employee in the affected age group, your employer should change your NIC category to a “no employee NIC” category (usually category C) from the first payday after you reach state pension age, so that no further employee NIC are deducted.
7. Income via digital platforms and record keeping
If you earn money through platforms (for example, ride hailing apps, food delivery, short term lets, or freelance marketplaces), the platform will now:
Collect and verify your details;
Report your transaction data to HMRC; and
Provide you with a summary of what has been reported.
This reporting regime started on 1 January 2024 and will continue into 2026–27. HMRC will increasingly be able to match your Self Assessment returns with this third party data.
You must keep your tax records for six years, unless HMRC agrees a shorter period. If HMRC opens an enquiry, you must keep the relevant records until the enquiry is closed.
Limited Companies
If you are the owner or manager of a limited company, this section covers points that may affect you in the 2026–27 tax year.
1. Class 1A NIC on benefits in kind
Where your company provides taxable benefits in kind to employees or directors (for example, company cars or private medical insurance), it must:
File form P11D(b) by 6 July following the end of the tax year; and
Pay Class 1A NIC by 22 July if paying electronically (or by 19 July if paying by cheque).
If the business ceases, any Class 1A NIC due must be paid within 14 days of the end of the tax month in which cessation occurs.
2. NIC disclosure rules (avoidance schemes)
If the company (or its advisers) uses arrangements designed to save Class 1 or Class 1A NIC, the disclosure of tax avoidance schemes (DOTAS) regime may apply.
Promoters must tell HMRC about notifiable schemes.
HMRC can issue a scheme reference number (SRN), which must be passed on to users of the scheme to avoid penalties.
This regime continues into 2026–27 and should be considered whenever you use non standard remuneration or benefit structures.
3. Directors and shareholders – interaction with personal tax
If you or other directors/shareholders extract profits from the company via dividends, remember that from 6 April 2026 the dividend ordinary and upper rates will be higher.
This means it is sensible to revisit your dividend versus salary planning and consider whether your current approach is still tax efficient.
VAT
1. Who needs to register
You must register for VAT if your taxable supplies exceed the UK VAT registration threshold over the last 12 months, or if you expect them to exceed the threshold in the next 30 days. The current threshold is £90,000 of taxable turnover, but this can be changed by future Budgets.
2. Changes in circumstances
Once registered, you must notify HMRC of any significant changes in your circumstances, such as:
Name or address;
Legal status (for example, from sole trader to company); or
The nature of your business.
You normally have 30 days to notify changes, often via HMRC’s online services. Failure to notify can lead to penalties, especially if HMRC loses tax as a result.
Payroll
1. Minimum wage changes
As announced in November, the National Minimum Wage (NMW) and National Living Wage (NLW) are set to increase from April 2026.
There are some exceptions and special rules, especially for apprentices, so you should always check the detailed government guidance.
Your employees must:
Be at least school leaving age to receive the National Minimum Wage; and
Be aged 21 or over to receive the National Living Wage (the minimum wage still applies to workers aged 20 and under).
Indicative rates (subject to confirmation by regulations) are:
|
|
April 2025 to March 2026 |
April 2026 & beyond |
|---|---|---|
|
Aged 21 and over (NLW) |
£12.21 |
£12.71 |
|
Aged 18 to 21 |
£10.00 |
£10.85 |
|
Under 18 |
£7.55 |
£8.00 |
|
Apprentices |
£7.55 |
£8.00 |
*Future rates are based on current announcements and may change when the final regulations are made.
An apprentice is entitled to the apprentice rate if they are:
under 19; or
19 or over and in the first year of their apprenticeship.
After the first year (if aged 19 or over), they must be paid at least the minimum wage rate for their age group.
The apprentice rate only applies from the start of a qualifying apprenticeship, which must have an apprenticeship agreement and a formal training programme. If someone works for you for two months before their apprenticeship officially begins, they must be paid at least the age related NMW/NLW for that period.
To find out more about minimum wage changes, please see our separate Tax Tip here.
2. Employee NIC and state pension age
Employee (primary) Class 1 NIC are due for workers aged 16 or over, but stop when the worker reaches state pension age. Employer NIC may still be due on their earnings.
State pension age is scheduled to increase to 67, phased from 6 April 2026, so more employees will reach pension age during or after the 2026–27 tax year. You should check each worker’s state pension age individually.
When an employee reaches state pension age, you must:
Change their NIC category letter (typically to category C); and
Ensure no further employee NIC are deducted from that date.
3. Employees working abroad
If an employee goes to work in a country that does not have a social security agreement with the UK, Class 1 NIC can remain compulsory for up to 52 weeks, provided the residence and employer conditions are met.
Payroll must:
Continue operating NIC during this 52 week period where applicable; and
Stop NIC from the date of leaving the UK if the conditions are not met.
4. Class 1A NIC on benefits
Payroll or HR should work closely with finance to ensure that:
All taxable benefits in kind are identified and included on forms P11D and P11D(b); and
Class 1A NIC is paid by 22 July following the end of the tax year (or by 19 July if paying by cheque).
If you need any tax advice in Milton Keynes give a call to the team at Holmes Accountancy on 01908 315716 or contact us here.
The tax tip is provided for general guidance only; further advice should be sought, for specific issues.
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