In 2026, UK households face a significant financial squeeze as multiple tax changes come into effect, threatening to cost thousands of pounds. These changes, announced as part of the Labour Party Autumn Budget and other recent fiscal plans, range from inheritance tax adjustments to increases in council tax, tobacco duty, alcohol duty, and new levies on vaping products.
While income tax and National Insurance rates remain unchanged, other taxes are set to rise. For example, alcohol duty rates will increase by 3.66% from February 2026, equating to roughly 2p extra on a pint of beer and 10p more on a bottle of wine. This hike aligns with inflation, ensuring the real value of these taxes remains steady.
Fuel duty, temporarily cut by 5p since the pandemic, will remain in place until August 2026 but is scheduled for a full reversal by March 2027. This means motorists will face higher costs at the pump again soon.
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Council tax has risen by 5% in most English regions, with some councils authorized to impose even steeper increases.
Tobacco duties will climb in two stages: by RPI plus 2 percentage points on 26 November 2025 and again on 1 October 2026, including an additional £2.20 per 100 cigarettes and the same amount per 50g on other tobacco products.
A new UK vape tax will take effect in October 2026, placing a £2.20 duty per 10ml on all vape liquids, nicotine or not. This will increase prices further, with VAT applied on top of the duty.
Changes to inheritance tax coming into effect from 6 April 2026 will allow tax-free passing of up to £2.5 million in qualifying farm or business assets, with amounts above this taxed at 20%. However, a new £1 million cap on inherited agricultural assets will also be introduced, potentially increasing tax bills for some farmers.
Those working from home will lose the ability to claim tax relief on extra household expenses such as gas and electricity from April 2026, ending the flat £6 weekly allowance.
Legislation will also provide zero-hour contract workers with statutory rights to payments for last-minute shift changes, which will now be subject to income tax and National Insurance.
For sole traders and landlords earning over £50,000 annually, new Making Tax Digital rules will require the use of approved software to submit quarterly income tax updates, replacing the traditional annual return.
Dividend tax rates will rise, with basic rate taxpayers seeing increases from 8.75% to 10.75%, and higher rate taxpayers from 33.75% to 35.75%.
Citizens Advice warns that these cumulative changes compound the ongoing cost-of-living crisis, with millions struggling to afford essentials like energy, rent, and food. They call for better-targeted government support to ease the burden on those most affected.
As these tax shifts take hold, UK households should prepare for less disposable income and carefully plan their finances in the year ahead.