2026 tax year – tax changes you need to know about

In the 2026 tax year, there are key changes to the tax law that have come into effect. These changes influence both individuals and businesses. Below we will discuss key changes to be aware of for the new tax year.

Personal tax changes

Increase in dividends tax

The rate of tax on dividends will increase both basic and higher rate by 2% for the 2026/27 tax year. For basic rate, the dividends tax will increase from 8.75% to 10.75%. The tax on dividends at the higher rate will increase from 33.75% to 35.75%. The additional rate will remain at 39.35%.

Making tax digital for income tax first wave begins

The first quarter of mandatory reporting starts for landlords and self employed for taxpayers earning qualifying income over £50,000. This is based on 2024/25 income. The first reporting deadline is Friday 7 August 2026.

For a more detailed breakdown of Making Tax Digital for income tax, read our in-depth coverage here.

Changes to Business Asset Disposal Relief (BADR)

From 6 April 2026, you will therefore pay capital gains tax at 18% (currently 14%) when you sell an asset that qualifies for Business Asset Disposal Relief.

Venture capital trusts (VCT)

The Government introduced VCT tax relief to encourage investment into smaller UK companies. If you met the relevant conditions, you could previously claim income tax relief at 30%. For the 2026/27 tax year, the Government has reduced this to 20%.

Business tax changes

Minimum wage raises

Recent changes to the minimum wage are expected to give 2.7 million people a pay rise. The national minimum wage is receiving an annual increase of 4.1% to £12.71 per hour. Employees aged 18-20 will receive an increase to £10.85 and employees aged 16-17 and apprentices will receive £8 per hour.

Increase in penalties for late filing of corporation tax returns

For Corporation tax returns with a filing date after 1 April 2026, some penalties are now double the previous amount.

Return submitted	Penalty
One day late	£200	(Previously £100)
Three months late	£200	(Previously £100)
Six months late	10% of the unpaid tax
12 months late	10% of the unpaid tax

If a return is late three times in a row, the initial fixed penalties increase to £1,000 each (previously £500).

Directors’ loans tax charge

The tax charged on directors’ loans made by a participator in a closed company will increase by 2%. This is an increase from 33.75% to 35.75% for loans made on or after 6 April 2026. This is in line with Section 455 rules.

Capital allowances

The main rate of writing-down allowance for plant and machinery is being cut from 18% to 14%. This is for periods starting on or after 1 April 2026 for Corporation tax.

HMRC removal of free corporation tax filing

For companies filing a tax return, this will need to be done through a commercial software from 1 April as HMRC has now closed the current system. Additionally, this also applies to changes and amendments which are now required to be submitted through an online filing service.

If you have any questions or would like to discuss any of the above further, please contact your local Perrys branch.