2026/27 Tax year updates & housekeeping for individuals

With the current tax year drawing to a close and the 2026/27 tax year on the horizon, this article provides a summary of upcoming tax changes for individuals, together with a reminder of some simple tasks to help keep your own (or your clients’) tax affairs in order. 

We’ve also included a handy summary of the key personal tax changes for the 2026/27 tax year towards the end of this article, and a quick look further ahead at important tax changes expected beyond April 2027.

Income Tax 

The tax-free personal allowance for 2026/27 remains at £12,570, and the levels of income from which higher and additional rate tax is payable in England, Wales and Northern Ireland will remain unchanged. Budget 2025 brought an extended freeze of all these amounts until at least April 2031 – a full decade since most of them were last changed. 

Freezing the personal allowance and tax rate thresholds means they are not keeping up with inflation. Where incomes rise with inflation, individuals get to keep less of any extra income they receive each year, and more taxpayers are brought into higher- and additional-rate tax bands. 

Scottish taxpayers

The Scottish Government has powers to set different tax rates and bands for non-savings, non-dividend income, which includes salaries, self-employment profits, pensions, and property income. These tax rates and bands apply to Scottish taxpayers only. Taxation of savings and dividend income follows the tax rates and bands applicable in the rest of the UK. 

Whilst the Scottish Income Tax rates from 6 April 2026 remain unchanged, there are small changes to the thresholds for the basic and intermediate Scottish Income Tax bands.

Taxation of investment income and capital gains

The tax-free dividend allowance (for shares not held in an Individual Savings Account, or ISA) remains at £500 for 2026/27. However, the basic and higher rates of tax on non-ISA dividend income above this amount are each set to increase by 2%. From 6 April 2026, tax payable on dividend income will be at 10.75% (previously 8.75%) for basic rate taxpayers, and at 35.75% (previously 33.75%) in the higher rate tax band. There is no increase to the dividend tax rate for additional rate taxpayers, who will continue to pay at 39.35% during the 2026/27 tax year. 

The Personal Savings Allowance is also unchanged – basic rate taxpayers will benefit from a £1,000 tax-free band for non-ISA interest income (commonly from bank and building society accounts, or unit trust investments), whilst higher-rate taxpayers can continue to earn £500 of interest tax-free. Those paying additional rates of tax are not entitled to a Personal Savings Allowance.

Neither income tax nor Capital Gains Tax (CGT) apply to cash or investments held within ISAs. Taxpayers can save up to £20,000 per tax year in total across all ISAs (cash, stocks and shares, innovative finance, and Lifetime ISAs). Whilst the ISA limit remains at £20,000 for the 2026/27 tax year, looking further ahead, the limit for adding cash to an ISA is set to fall to £12,000 from April 2027 for people aged 64 and under. The £20,000 total ISA limit is set to remain beyond April 2027, meaning if you’re under age 65 in 2027/28 you’ll be able to add a maximum of £12,000 to a cash ISA and £8,000 to a stocks and shares ISA. The 2026/27 tax year therefore represents an opportunity to maximise cash ISA balances before this restriction, although investment advice may be necessary before changing any investment strategy. 

The CGT annual exemption for individuals has been retained at £3,000 for the tax year beginning 6 April 2026. CGT rates remain unchanged, 18% for basic rate taxpayers and 24% for higher/additional rate taxpayers. The exception is capital gains where a claim for Business Asset Disposal Relief or Investors Relief is made – here the CGT rate increases from 14% to 18% for disposals on or after 6 April 2026. 

National Insurance Contributions (NICs)

The main thresholds and rates for Class 1 NICs for employees and employers are unchanged for 2026/27 – for most employees, the main rate applicable to earnings between £12,570 and £50,270 will be 8%. Above £50,270, Class 1 NIC is due at 2%.

For employers, the rate of Class 1 NICs remains unchanged at 15% on earnings over £5,000 per year. Class 1A NICs also remain payable by employers at 15% on the value of most benefits in kind provided to their employees.

For the self-employed, Class 4 NICs in 2026/27 will remain payable at 6% on profits between £12,570 and £50,270, and at 2% on profits above £50,270. 

Class 2 NICs are payable (at £3.65 per week) only on a voluntary basis for those earning under the Small Profits Threshold, which will be £7,105 for 2026/27. Please see our separate article ‘Class 2 National Insurance – what’s changing from April 2024?’ for further details.

Some individuals based overseas choose to pay NICs voluntarily, commonly to build entitlement to a UK State Pension. Those who have previously chosen to pay Class 2 NICs will find voluntary payments become more expensive for the 2026/27 tax year onwards. In addition, the eligibility criteria for making voluntary NIC payments for periods abroad become more restrictive from April 2026. We’ve written a separate article explaining the changes to voluntary NICs for periods spent overseas in more detail. 

Tax exemptions and reliefs for employees

Whilst NICs are largely unchanged for 2026/27, there are two significant changes to tax exemptions and reliefs affecting employees. 

From 6 April 2026, if an employee pays for: a flu vaccine, an eye test, or home-working equipment, their employer will be able to reimburse them for the cost without either employer or staff member incurring tax or NIC liabilities. Under previous rules, the employer generally had to pay for these items directly (or in some cases provide a voucher) in order to prevent tax and NIC complications arising. 

In less positive news for employees who work from home, from 6 April 2026 it will no longer be possible to claim tax relief from HMRC for additional costs of home-working (commonly based on a £6 per week ‘flat rate’). From the 2026/27 tax year, employers can still reimburse their employees tax-free for additional home-working costs. But for employees who work from home and whose employers do not offer this reimbursement, it will no longer be possible to claim tax relief for additional costs of working at home. 

Inheritance Tax 

Whilst Inheritance Tax (IHT) is not an ‘everyday’ tax, a significant change to IHT reliefs comes into effect from 6 April 2026 which will affect business owners, including farmers. 

The amount of property eligible for 100% Agricultural Relief and 100% Business Relief is capped at £2.5m per individual from April 2026, with a 50% rate of relief applying to assets above this limit. Our Find an ATT member service can help business owners who may be affected by this to find professional advice. 

Budget 2025 also brought an extension of the freeze on all IHT nil-rate bands through to April 2031. By that time, the main nil-rate band will have remained at £325,000 for 21 years, meaning more estates have had to pay IHT as asset values have risen. 

Self-Assessment requirements

Since 6 April 2024 there has been no threshold for PAYE income above which a Self-Assessment tax return has to be filed, meaning even the highest earning employees no longer have to file a tax return if they have ‘simple’ tax affairs (for instance salary only, with no tax relief needing to be claimed). HMRC has an interactive tool to check if you need to send a Self Assessment tax return. 

Taxpayers needing to file a return in 2026/27 who have previous history of filing tax returns, but who have not had to do so for a year or more, are advised to ‘reactivate’ their previous Self Assessment record to avoid unnecessary complications. 

April 2026 sees the first wave of taxpayers joining Making Tax Digital for Income Tax – broadly those who reported gross self-employment and/or property income of more than £50,000 via their 2024/25 tax returns. Our Making Tax Digital landing page contains links to further guidance. 

Summary of key changes for 2026/27

• Dividend tax rates: 2% increase in basic and higher rates, to 10.75% and 35.75% respectively.

   

• Scottish Income Tax: small changes to basic and intermediate rate thresholds.

   

• Capital Gains Tax: rate where Business Asset Disposal Relief or Investors Relief is claimed increases to 18%.

   

• Flu vaccines, eye tests and home-working equipment: employers can reimburse employees tax-free where they pay for these personally.

   

• Tax-relief for home-working costs: employees can no longer claim from HMRC, they have to be reimbursed by the employer.

   

• Inheritance Tax: 100% agricultural and business relief capped at £2.5m of assets per person.

   

• Making Tax Digital: landlords and sole-traders with ‘qualifying income’ over £50,000 have to comply.

   

Changes coming in 2027 and beyond

Budget 2025 was a bumper edition, with several measures announced which will affect taxpayers beyond the 2026/27 tax year. Below is a brief outline of some changes which may affect you in the future.

April 2027: New tax rates for property and savings income

From 6 April 2027, new tax rates will apply to savings income and profits from renting property. The rates are expected to be 2% above the main rates of income tax – so 22%, 42% and 47% in the basic, higher and additional rate tax bands respectively. 

April 2027: Self-Assessment changes 

Making Tax Digital will expand in April 2027, bringing taxpayers who report gross self-employment and/or property income of more than £30,000 on their 2025/26 tax returns into the new regime. Our Making Tax Digital landing page contains links to further guidance.

In addition, a new penalty regime will apply for taxpayers who submit their returns late, or are late paying HMRC. 

April 2029: NIC relief restricted for salary-sacrifice

A new £2,000 annual cap will apply to salary sacrifice pension contributions that qualify for NIC relief. For further details, see our article on changes to salary sacrifice pension contributions.

General ‘housekeeping’ for the new tax year

The following points are commonly overlooked, but are worth revisiting to check whether any action is needed for the new tax year.

PAYE codes

Employees can review what goes into their PAYE code in their Personal Tax Account, via the HMRC app or by checking any hard copies received through the post. HMRC also provide an interactive ‘check what your tax code means’ tool, which gives a breakdown of what the letters and numbers in the tax code mean, and an estimate of how much tax is likely to be payable on the employment income.  We’ve also made a short video on how to check or change your tax code.

If anything doesn’t look right in the tax code, individuals without a tax adviser can make the necessary changes via their Personal Tax Account or the HMRC app, or can contact HMRC to discuss any concerns with the code.

Taxpayers who employ an accountant or agent should send their adviser copies of any updated tax codes they receive, as agents are rarely notified of new PAYE codes, and in some cases cannot access the updated versions via their HMRC agent logins.

Employers cannot change a PAYE code without receiving fresh instructions from HMRC, so the onus is on the individual to check their coding notice, or to ask their tax adviser for help.

Marriage Allowance Transfer

Where one person in a marriage or civil partnership doesn’t use their full tax-free personal allowance (£12,570), 10% of that amount can be transferred to their spouse/civil partner to reduce the amount of tax payable by up to £252.

This claim but can be backdated by up to four years and must be made by the person giving up part of their personal allowance (ie the lower earner in the couple). Further details on the Marriage Allowance, including how to apply, are available online. 

High Income Child Benefit Charge

Major changes were made to the High Income Child Benefit Charge (HICBC) at the start of the 2024/25 tax year. Since then, HMRC have developed a range of digital services to help those it affects. 

Firstly, a digital service allowing Child Benefit claimants to opt in or out of receiving payments should help households who would previously have had to pay the HICBC to opt back in to receiving payments if the increased thresholds applicable from the 2024/25 tax year mean they would now be better off receiving Child Benefit payments.

Secondly, HMRC now allow employees to pay the High Income Child Benefit Charge via PAYE where they have no other reason to complete a self-assessment tax return. The aim is to save them from having to file a tax return. We covered this service in a previous article in our Employer Focus newsletter.

Summary

The transition to a new tax year is the perfect time for a quick review of your personal tax affairs. Considering the above measures now and making any changes necessary to your financial affairs could improve your tax position over the coming tax years, potentially simplifying your tax affairs and helping you plan for future changes.