What's Changed for 2026-27
The 2026-27 tax year runs from 6 April 2026 to 5 April 2027. Here's a summary of the key changes compared to 2025-26 and how they affect your pay.
Compare your exact take-home pay
Enter your salary in the Tax Year Comparison tool to see the pound-for-pound difference
Looking further ahead? Autumn Budget 2026 is confirmed for 28 October
See the confirmed date, what's already locked in for 2026-27, and what to watch for on the day
Income Tax
Income tax thresholds and rates remain frozen for 2026-27 — the same as 2025-26.
- Personal Allowance: £12,570 (unchanged)
- Basic rate band (England/Wales/NI): £12,571 – £50,270 at 20% (unchanged)
- Higher rate: £50,271 – £125,140 at 40% (unchanged)
- Additional rate: Above £125,140 at 45% (unchanged)
- Scotland: Six bands from 19% to 48% — thresholds unchanged from 2025-26
With thresholds frozen and wages rising, more people are pulled into higher bands — a phenomenon known as fiscal drag.
Calculate your income tax See every band, rate and allowance in the full UK tax brackets referenceFiscal Drag — What the Freeze Costs You
By 2026-27 the freeze has been in place for five years. If the Personal Allowance had tracked CPI since April 2021 it would be roughly £15,750; the £50,270 higher-rate threshold would be around £63,000. The implicit extra tax — the "stealth tax" — varies by salary band:
| Salary 2026-27 | Indicative extra tax vs CPI counterfactual | Why |
|---|---|---|
| £30,000 | ~£636 / yr | PA frozen £3,180 below CPI path |
| £50,270 | ~£636 / yr | Same PA delta, still basic rate |
| £75,000 | ~£3,180 / yr | Now over HRT; both PA + HRT freeze bite at 40% on the £12,730 differential |
| £100,000 | ~£3,180 / yr | PA taper start unfrozen at £100k — same HRT-band cap as £75k |
| £150,000 | ~£3,180 / yr | Additional rate threshold £125,140 unfrozen since 2023-24 |
Estimates based on a 2.5% CPI projection through 2026-27. Real impact depends on your actual 2021 baseline salary and pay-rise trajectory. Autumn Budget 2025 extended the freeze by a further three years, so it is now scheduled to last through April 2031.
Read the full fiscal-drag deep-diveNational Insurance
NI rates and thresholds remain unchanged for 2026-27.
- Employee Class 1: 8% on £12,570 – £50,270, 2% above (unchanged)
- Self-employed Class 4: 6% on £12,570 – £50,270, 2% above (unchanged)
- Class 2 weekly rate: £3.65 (up from £3.50 in 2025-26)
Dividend Tax
Basic and higher dividend rates rose 2 percentage points from 6 April 2026 (Autumn Budget 2025 / Finance (No.2) Bill 2024-26). The additional rate is unchanged.
| Band | 2025-26 | 2026-27 |
|---|---|---|
| Dividend Allowance | £500 | £500 |
| Basic rate | 8.75% | 10.75% |
| Higher rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% |
On £10,000 of dividends (after the £500 allowance) a basic-rate taxpayer now pays £1,021.25 instead of £831.25 — £190 more per year. A higher-rate taxpayer with dividends taxed in the higher band pays proportionally more as their taxable dividend amount grows.
Calculate your dividend taxSavings & Dividend Allowance Status
Both allowances stay flat for 2026-27. Combined with the dividend rate rise, the net effect is more taxable income at higher rates for shareholders and savers.
| Allowance | 2025-26 | 2026-27 |
|---|---|---|
| Dividend Allowance (all bands) | £500 | £500 |
| Personal Savings Allowance — Basic rate | £1,000 | £1,000 |
| Personal Savings Allowance — Higher rate | £500 | £500 |
| Personal Savings Allowance — Additional rate | £0 | £0 |
| Starting rate for savings band (low-income) | £5,000 | £5,000 |
Dividend Allowance was £2,000 in 2022-23, halved to £1,000 in 2023-24, and halved again to £500 from 2024-25 — that's 75% gone in three years. Salary-vs-dividend optimisation now matters even for modest portfolios.
Optimise your salary, dividends & savingsCapital Gains Tax
All CGT rates are now unified at 18%/24% since the Autumn 2024 Budget. BADR and Investors' Relief rates continue their phased increase.
- Annual Exempt Amount: £3,000 (unchanged)
- All assets: 18% / 24% (unchanged from 2025-26)
- BADR rate: 14% → 18%
- Investors' Relief rate: 14% → 18%
Student Loan Thresholds
Repayment thresholds have increased for Plan 1, Plan 2 and Plan 4, meaning slightly lower monthly repayments.
| Plan | 2025-26 | 2026-27 |
|---|---|---|
| Plan 1 | £26,065 | £26,900 |
| Plan 2 | £28,470 | £29,385 |
| Plan 4 (Scotland) | £32,745 | £33,795 |
| Plan 5 | £25,000 | £25,000 |
| Postgraduate | £21,000 | £21,000 |
BPR & APR £2.5M Cap (Inheritance Tax)
From 6 April 2026, Business Property Relief and Agricultural Property Relief are capped at £2,500,000 combined per person (Finance Act 2026, s65 / sch 12). Above the cap, relief drops to 50% — producing an effective 20% IHT rate on the excess. The most significant IHT reform since 1996.
- 100% relief on first £2,500,000 of qualifying BPR + APR property combined
- 50% relief above the cap — effective 20% IHT rate (40% × 50%)
- AIM-listed shares: 50% flat — does not consume the £2,500,000 allowance
- Spouse-transferable — unused percentage passes to survivor; couples can shelter up to £5,000,000 of qualifying property
- Cap was £1M in the original Autumn 2024 proposal; raised to £2,500,000 on 23 December 2025 after farming/business pushback
Pension IHT — 12-Month Runway to 6 April 2027
2026-27 is the last tax year before unused DC pensions enter the estate for IHT. From 6 April 2027, undrawn defined-contribution pension pots count toward the £325,000 nil-rate band ceiling for the first time. If your DC pot plus other estate assets exceed £325,000 (£500,000 with RNRB), planning during 2026-27 can avoid 40% IHT on the pension excess.
- Drawdown — convert taxable pension to spent / gifted income while the cheap pension wrapper still applies
- Lifetime gifting — 7-year clock starts now; outside-estate by 2034
- Annuitisation — converts pot to spouse-transferable income that doesn't count as estate
- Spend-down strategies — order of withdrawal across SIPP / ISA / GIA matters now
Making Tax Digital for ITSA — Launches April 2026
The first wave of Making Tax Digital for Income Tax Self Assessment launches 6 April 2026 for sole traders and landlords with qualifying income above £50,000. Quarterly digital updates replace one annual Self Assessment.
- Who's in from 6 April 2026: sole traders + landlords with combined trading + property income > £50,000
- Who's in from 6 April 2027: threshold drops to £30,000
- Filing cadence: 4 quarterly updates + an end-of-period statement + a final declaration (replaces SA100)
- Software: must use HMRC-recognised MTD-compatible software; spreadsheets work via bridging tools
Deep-Dive Insights for 2026-27
Each headline change has a dedicated explainer with worked examples and decision frameworks.
Frozen Thresholds & Fiscal Drag 2026-27
Five years of freeze, who's hit hardest, legal levers to escape
Dividend Tax Rise April 2026
+2pp basic & higher rates: who pays more, salary-vs-dividend impact
Dividend Allowance Cut to £500
75% gone in 3 years — impact on directors and investors
BPR & APR £2.5M Cap
Finance Act 2026 reform: who's affected, before-April-2026 actions
Pension IHT 2027 — 12-Month Runway
Drawdown / gifting / annuity / spend-down playbook
Making Tax Digital ITSA
£50k+ launch April 2026: software, quarterly cadence, transition
Payment on Account 31 July 2026
SA300 reduce-claim guide for self-employed cashflow
BADR Rate 14% → 18%
CGT lifetime relief: phased increase and disposal-timing trade-offs
See the exact impact on your pay
Enter your salary to compare your take-home pay between 2025-26 and 2026-27 side by side.
Frequently asked questions
What are the biggest UK tax changes for 2026-27?
The three headline changes: dividend tax rates rise 2 percentage points (basic 8.75% → 10.75%, higher 33.75% → 35.75%) from 6 April 2026; Business Property Relief and Agricultural Property Relief are capped at a combined £2.5M per person, with 50% relief above that; and Making Tax Digital for Income Tax launches for sole traders and landlords with qualifying income above £50,000. Income tax and NI thresholds stay frozen, continuing five years of fiscal drag.
Are income tax and National Insurance thresholds changing for 2026-27?
No. The Personal Allowance (£12,570), higher-rate threshold (£50,270) and NI thresholds all stay frozen for 2026-27 — unchanged since the freeze was extended to April 2031 at the Autumn Budget 2025. With wages still rising, more income is pulled into higher tax bands each year (fiscal drag).
How much more will I pay in dividend tax from April 2026?
On £10,000 of dividends after the £500 allowance, a basic-rate taxpayer pays about £190 more per year at the new 10.75% rate versus 8.75% in 2025-26. Higher-rate taxpayers see a bigger jump on dividends taxed at 35.75% instead of 33.75%.
Who has to join Making Tax Digital for Income Tax in 2026-27?
Sole traders and landlords with combined trading and property income above £50,000 (based on their 2024-25 tax return) must join from 6 April 2026. The threshold drops to £30,000 from 6 April 2027, bringing in a wider group of self-employed people and landlords.
What is the BPR/APR £2.5M cap and who does it affect?
From 6 April 2026, Business Property Relief and Agricultural Property Relief share one combined £2.5M-per-person allowance at 100% relief; value above that gets 50% relief (an effective 20% IHT rate). It mainly affects estates with substantial family business or farming assets, and AIM-listed shares are separately capped at 50% relief regardless of value.
Should I do anything before the 2026-27 tax year starts?
Review dividend-vs-salary extraction if you run a company (the 2pp dividend rate rise changes the maths), check whether your self-employment or rental income is approaching the £50,000 MTD threshold, and if you have a sizeable estate with business or agricultural property, get advice on the new £2.5M BPR/APR cap before 6 April 2026.