New Tax Year 2026: Key Changes Every UK Business Owner Must Know

The new tax year is officially underway. As of 6th April 2026, a fresh set of rates, thresholds, and rules came into effect across the UK tax system. For business owners, staying on top of these changes isn't just about compliance, it's about protecting your profits, planning your cash flow, and making informed decisions for the months ahead.

Some changes are straightforward adjustments to familiar numbers. Others signal shifts in government priorities that could affect your long term strategy. Whether you're a sole trader, a limited company director, or an employer, here's everything you need to know about the UK tax changes 2026 shaping the new tax year UK landscape.

Personal Tax: Thresholds Frozen Again

The freeze on personal tax thresholds continues. While this isn't a "change" in the sense of a new number, it's arguably the most impactful policy for many business owners who draw income from their companies.

Threshold 2025/26 2026/27 Change

Personal Allowance £12,570 £12,570 Frozen
Higher Rate Threshold £50,270 £50,270 Frozen
Additional Rate Threshold £125,140 £125,140 Frozen

What this means for you:

If your profits or income rise with inflation, you'll pay more tax even though your real purchasing power hasn't increased. This "fiscal drag" continues to pull more income into higher tax bands. For directors, careful planning around salary and dividend timing is more valuable than ever.

Action: Review your expected income for 2026/27. If you're close to a threshold, consider pension contributions or other reliefs to manage your taxable income.

Dividend Tax: Allowance Remains at £500

The dividend allowance stays at just £500 for 2026/27. Before 2023/24, it was as high as £5,000. The dramatic reduction has fundamentally changed how directors should think about extracting profits.

Dividend Allowance 2022/23 2023/24 2024/25 2025/26 2026/27

£2,000 £1,000 £500 £500 £500

What this means for you:

Almost every dividend you take beyond the first £500 is now taxable. The old strategy of "take dividends up to the allowance" is largely obsolete. Instead, focus on the optimal mix of salary and dividends for your overall tax position.

Action: Recalculate your optimal director's remuneration for 2026/27. Don't assume last year's split is still correct.

National Insurance: Rates and Thresholds

For employers, National Insurance remains a significant cost. Here are the key numbers for 2026/27:

NI Component 2025/26 2026/27 Change

Primary Threshold (Employee NI) £12,570 £12,570 Frozen

Secondary Threshold (Employer NI) £9,100 £9,100 Frozen

Upper Earnings Limit £50,270 £50,270 Frozen

Employer NI Rate 13.8% 13.8% No change

Employee NI Rate (main) 10% 10% No change

What this means for you:

The thresholds remain frozen, meaning more of your employees' earnings fall into the NI net each year as wages rise. For employers, this increases your staffing costs. For directors taking a salary, the optimal salary level (around £12,570) remains unchanged to avoid employee NI while protecting state pension entitlement.

Action: If you employ staff, model your payroll costs for 2026/27. Consider whether any efficiency savings can offset increased NI burdens.

Capital Gains Tax: Allowance Frozen at £3,000

The CGT annual exempt amount remains at £3,000 for individuals and £1,500 for most trustees. This is the third year at this reduced level.

CGT Allowance 2022/23 2023/24 2024/25 2025/26 2026/27

£12,300 £6,000 £3,000 £3,000 £3,000

What this means for you:

With the allowance so low, most investors and business owners selling chargeable assets will face a CGT bill. Strategic planning using ISAs, pension wrappers, and loss harvesting is no longer optional.

Action: Review any assets you plan to sell in 2026/27. Can you spread disposals across multiple tax years to use the allowance each year?

Corporation Tax: Rates Unchanged

Main corporation tax rates remain at 19% for profits under £50,000 and 25% for profits over £250,000, with marginal relief for profits in between.

Profit Level 2026/27 Rate

Up to £50,000 19%

£50,001 - £250,000 Marginal relief applies

Over £250,000 25%

What this means for you:

No change here, but that doesn't mean no planning. With rates diverging significantly between small and large profits, timing of income and expenditure remains critical for businesses near the thresholds.

Action: If your profits are close to £50,000 or £250,000, work with your accountant to smooth income and accelerate allowable expenses where possible.

Making Tax Digital (MTD) for Income Tax: Phased Expansion Continues

MTD for Income Tax is now fully in effect for sole traders and landlords with income above £50,000. From April 2026, the threshold drops to £30,000.

Income Threshold MTD Required From

Over £50,000 April 2025 (already in effect)

Over £30,000 April 2026 (now in effect)

Under £30,000 Voluntary (mandatory date TBC)

What this means for you:

If your self-employed or property income exceeds £30,000, you must now use MTD compliant software to submit quarterly updates to HMRC. Spreadsheets alone are no longer sufficient.

Action: If you haven't already, ensure your accounting software is MTD compliant and that you've submitted your first quarterly update for 2026/27.

National Living Wage and Minimum Wage

The government's announced increases to wage rates take effect from April 2026:

Rate Type Age Group 2025/26 2026/27 Increase

National Living Wage 21+ £11.44 £12.21 +6.7%

National Minimum Wage 18-20 £8.60 £9.15 +6.4%

National Minimum Wage Under 18 £6.40 £6.80 +6.3%

Apprentice Rate All apprentices £6.40 £6.80 +6.3%

What this means for you:

If you employ staff in these age brackets, your wage bill just increases. The rise is significant, nearly 7% for most workers. For businesses with tight margins, this may require price adjustments or efficiency improvements.

Action: Review your payroll budget for 2026/27. If wage increases outstrip your ability to raise prices, identify other cost savings.

Employment Allowance: Remains at £5,000

The Employment Allowance continues at £5,000 for eligible employers. This reduces your employer NI bill by up to £5,000 per year.

Eligibility: Most businesses with employer NI liabilities under £100,000 in the previous tax year can claim.

What this means for you:

If you're not claiming the Employment Allowance, you're leaving money on the table. The allowance can make a small salary for directors even more tax-efficient.

Action: Check if your business is eligible. If so, ensure your payroll software has the claim activated for 2026/27.

Your New Tax Year Action Plan

• Now that you understand what's changed, here's what to do next:

• Update your accounting software with 2026/27 rates and thresholds

• Review your director's remuneration (salary vs dividends) for the new year

• Check MTD compliance if your income exceeds £30,000

• Model your payroll costs including wage increases and employer NI

• Claim the Employment Allowance if eligible

• Plan CGT disposals to use the £3,000 allowance

• Set up monthly tax savings transfers based on your projected liability

• Schedule a quarterly review with your accountant

Knowledge Is Power. Action Is Profit.

Tax changes can feel overwhelming, especially when they arrive in a cluster at the start of a new financial year. But understanding what's different and what it means for your specific business turns complexity into clarity. And clarity is the foundation of smart, profitable decision making.

At Boobooks Accounting, we help UK business owners navigate exactly this. From updating your systems to reviewing your strategy, we ensure you're not just aware of the changes, you're acting on them.

Understand what’s changed for your business.

Book your new tax year review today.