New Tax Year 2026/27: 7 Key Changes from 6 April 2026

1. Personal Allowance and Income Tax thresholds — still frozen

The Personal Allowance (£12,570) and the higher-rate threshold (£50,270) remain frozen for 2026/27. The government's freeze, announced at Autumn Budget 2022, continues until at least April 2028.

Impact: With average earnings growing by ~5% per year, more people are crossing into the basic rate and higher rate bands each year. This is one of the largest stealth tax rises in modern UK fiscal history.

2. MTD ITSA — mandatory for higher earners from 6 April 2026

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is the biggest administrative change for the self-employed since the introduction of Self Assessment itself.

From 6 April 2026, all self-employed individuals and landlords with gross income above £50,000 must:

1. Use HMRC-approved software to record income and expenses digitally.
2. Submit quarterly digital updates to HMRC (April–June, July–September, October–December, January–March).
3. Submit an End of Period Statement (EOPS) after the tax year ends.
4. Submit a Final Declaration (equivalent to the old tax return) by 31 January.

Annual Self Assessment returns for affected taxpayers are replaced by this quarterly reporting cycle.

Who is affected in April 2026?

• Self-employed with turnover > £50,000 per year.
• Landlords with property income > £50,000 per year.
• Those with income from both above £50,000 combined.

Those between £30,000 and £50,000 follow in April 2027; between £20,000 and £30,000 in April 2028. Partnerships will join at a later date.

If you are affected, choose HMRC-recognised software (Xero, QuickBooks, FreeAgent and others have compatible versions) before April 2026.

3. National Insurance — employer rate stays at 15%

Employer NI was raised from 13.8% to 15% in the October 2024 Autumn Budget, effective April 2025. The rate remains at 15% for 2026/27. The Secondary Threshold (the point above which employers pay NI) also dropped from £9,100 to £5,000 per year.

Employee NI rates are unchanged:

• 8% on earnings between £12,570 and £50,270.
• 2% on earnings above £50,270.

The higher employer NI cost has increased total cost-of-employment for businesses, particularly for lower-paid workers. The Employment Allowance increased to £10,500 per year to partially offset this for smaller employers.

4. Business Asset Disposal Relief (BADR) — rate rising to 18%

Previously known as Entrepreneurs' Relief, BADR gives a reduced CGT rate on qualifying business disposals.

If you are planning to sell a business, shares in a personal company, or dispose of business assets, the timing around 5 April 2026 is critical. Disposals completing before that date qualify for the 14% rate; disposals on or after 6 April 2026 pay 18%.

5. Capital Gains Tax — rates unchanged but higher from October 2024 baseline

The CGT rate increase from October 2024 (18% basic / 24% higher for most assets; residential property unchanged at 18%/24%) is now fully embedded for 2026/27. There is no further rate change announced for 2026/27.

The annual CGT exempt amount remains at £3,000 — down from £12,300 before April 2023. This dramatically reduces the tax-free gains available and makes ISA sheltering more important.

6. ISA and pension allowances — unchanged

The pension Lump Sum Allowance (LSA) — the tax-free cash cap introduced when the Lifetime Allowance was abolished — remains at £268,275.

Key date: 5 April 2026 — the ISA year-end. Unused ISA allowance cannot be carried forward. If you have not used your 2025/26 £20,000 ISA allowance, do so before midnight on 5 April 2026.

Also: 2022/23 pension carry-forward allowance expires on 5 April 2026. If you have unused pension allowance from 2022/23 and want to carry it forward, you must use it in the 2025/26 tax year.

7. Inheritance Tax — new changes from April 2027 (not 2026)

The government announced in Autumn Budget 2024 that from April 2027 (not April 2026), inherited pension pots will be included in the estate for IHT purposes. This change affects those with defined contribution pension pots who have not yet drawn them down.

For 2026/27, IHT thresholds remain:

• Nil-rate band: £325,000.
• Residence nil-rate band (RNRB): £175,000 (for passing a main home to direct descendants).
• Combined threshold: £500,000 per person, £1 million for married couples/civil partners.

What to do before 6 April 2026

1. Use your ISA allowance — contribute up to £20,000 before 5 April 2026.
2. Use pension carry-forward — the 2022/23 year's unused pension allowance expires on 5 April 2026.
3. CGT planning — if you have gains to crystallise, consider doing so before the BADR rate rises on 6 April.
4. MTD ITSA preparation — if your income is above £50,000 from self-employment or property, register for and test HMRC-compatible software before April 2026.
5. Review pension contributions — if the frozen thresholds now put you into a higher band than before, salary sacrifice into pension is more effective than ever.

Sources

• HMRC: Income Tax rates and allowances
• HMRC: MTD ITSA — overview
• HMRC: Business Asset Disposal Relief
• HM Treasury: Autumn Budget 2024