Starting April 6, 2026, a series of important tax changes will come into effect for UK households, as the new tax year begins. These updates, announced by HMRC under the current Labour government, cover a wide array of areas including business rates, inheritance tax relief, capital gains, and more.
The UK tax year, running from April 6 to April 5 the following year, marks a crucial period for individuals and businesses alike. Many businesses align their financial year with the tax year, requiring them to compile financial data and prepare accounts. Similarly, investment products such as Individual Savings Accounts (ISAs) operate on the same cycle, prompting savers to maximize their annual allowances before the tax year closes.
One major change concerns the relief on agricultural and business property (APR and BPR). From April 6, 2026, the full 100% relief will be capped at £2.5 million of combined agricultural and business property. Assets exceeding this limit will receive 50% relief. This £2.5 million threshold will be indexed to the Consumer Prices Index (CPI) starting April 2031. Importantly, any unused allowance can be transferred between spouses or civil partners, effectively doubling the relief to £5 million for couples. The allowance refreshes every seven years.
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Additionally, shares not listed on recognised stock exchanges, including those on the Alternative Investment Market (AIM), will see their relief reduced from 100% to 50%, without affecting the £2.5 million allowance. For Business Asset Disposal Relief (BADR), the capital gains tax rate will rise from 14% to 18%, though the lifetime limit remains at £1 million.
From April 2026, sole traders and landlords with incomes over £50,000 must keep digital records and submit quarterly tax updates through HMRC’s Making Tax Digital initiative. This requires compatible software to track income, expenses, VAT where applicable, and tax adjustments.
Dividend tax rates are set to increase by 2% as well, with the basic rate climbing from 8.75% to 10.75% and higher rates rising from 33.75% to 35.75%. The dividend allowance will remain at £500, urging shareholders to review profit extraction strategies.
The Alternative Investment Market (AIM) shares’ reduced relief means a permanent 20% inheritance tax liability on death for such holdings.
On the labor front, the National Minimum Wage will increase significantly. From April, the hourly rate for over-21s will rise by 50p to £12.71, 18-20-year-olds will see an 85p increase to £10.85, and under-18s and apprentices will gain 45p more, reaching £8 per hour. Chancellor Rachel Reeves highlighted that 2.7 million workers will benefit, but some employers warn these hikes may lead to hiring freezes.
Incorporation relief for businesses converting to a corporate structure will no longer be automatic after April 2026, subject to conditions.
For employees working from home, tax relief on additional household expenses such as gas and electricity will be discontinued from April 2026. The current flat-rate work-from-home allowance of £6 per week is being withdrawn, applicable only to those without a fixed office.
The government is also overhauling business rates relief by ending retail, hospitality, and leisure relief, replacing it with two reduced business rates multipliers for properties with rateable values below £500,000. The 2026/27 financial year will introduce five new multipliers, reshaping how business rates are applied.
Finally, eligibility for Enterprise Management Incentives (EMI) share options is expanding. Companies with up to 500 employees (up from 250) and gross assets up to £120 million (previously £30 million) can now offer tax-advantaged share options to a wider group of employees.
These changes represent a significant shift in the UK’s tax landscape for households and businesses alike, making it essential for taxpayers to review their financial plans and comply with new digital reporting requirements starting in 2026.