What's Changed for 2026-27

Income tax thresholds and rates remain frozen for 2026-27 — the same as 2025-26.

• Personal Allowance: £12,570 (unchanged)
• Basic rate band (England/Wales/NI): £12,571 – £50,270 at 20% (unchanged)
• Higher rate: £50,271 – £125,140 at 40% (unchanged)
• Additional rate: Above £125,140 at 45% (unchanged)
• Scotland: Six bands from 19% to 48% — thresholds unchanged from 2025-26

With thresholds frozen and wages rising, more people are pulled into higher bands — a phenomenon known as fiscal drag.

By 2026-27 the freeze has been in place for five years. If the Personal Allowance had tracked CPI since April 2021 it would be roughly £15,750; the £50,270 higher-rate threshold would be around £63,000. The implicit extra tax — the "stealth tax" — varies by salary band:

Estimates based on a 2.5% CPI projection through 2026-27. Real impact depends on your actual 2021 baseline salary and pay-rise trajectory. The freeze is scheduled to last through April 2028.

NI rates and thresholds remain unchanged for 2026-27.

• Employee Class 1: 8% on £12,570 – £50,270, 2% above (unchanged)
• Self-employed Class 4: 6% on £12,570 – £50,270, 2% above (unchanged)
• Class 2 weekly rate: £3.50 (unchanged)

Basic and higher dividend rates rose 2 percentage points from 6 April 2026 (Autumn Budget 2025 / Finance (No.2) Bill 2024-26). The additional rate is unchanged.

On £10,000 of dividends (after the £500 allowance) a basic-rate taxpayer now pays £1,021.25 instead of £831.25 — £190 more per year. A higher-rate taxpayer on the same £10,000 pays £1,900 more where the dividends cross the higher band.

Both allowances stay flat for 2026-27. Combined with the dividend rate rise, the net effect is more taxable income at higher rates for shareholders and savers.

Dividend Allowance was £2,000 in 2022-23, halved to £1,000 in 2023-24, and halved again to £500 from 2024-25 — that's 75% gone in three years. Salary-vs-dividend optimisation now matters even for modest portfolios.

All CGT rates are now unified at 18%/24% since the Autumn 2024 Budget. BADR and Investors' Relief rates continue their phased increase.

• Annual Exempt Amount: £3,000 (unchanged)
• All assets: 18% / 24% (unchanged from 2025-26)
• BADR rate: 14% → 18%
• Investors' Relief rate: 14% → 18%

Repayment thresholds have increased for Plan 1 and Plan 2, meaning slightly lower monthly repayments.

From 6 April 2026, Business Property Relief and Agricultural Property Relief are capped at £2.5M combined per person (Finance Act 2026, s65 / sch 12). Above the cap, relief drops to 50% — producing an effective 20% IHT rate on the excess. The most significant IHT reform since 1996.

• 100% relief on first £2.5M of qualifying BPR + APR property combined
• 50% relief above the cap — effective 20% IHT rate (40% × 50%)
• AIM-listed shares: 50% flat — does not consume the £2.5M allowance
• Spouse-transferable — unused percentage passes to survivor; couples can shelter up to £5M of qualifying property
• Cap was £1M in the original Autumn 2024 proposal; raised to £2.5M on 23 December 2025 after farming/business pushback

2026-27 is the last tax year before unused DC pensions enter the estate for IHT. From 6 April 2027, undrawn defined-contribution pension pots count toward the £325,000 nil-rate band ceiling for the first time. If your DC pot plus other estate assets exceed £325k (£500k with RNRB), planning during 2026-27 can avoid 40% IHT on the pension excess.

• Drawdown — convert taxable pension to spent / gifted income while the cheap pension wrapper still applies
• Lifetime gifting — 7-year clock starts now; outside-estate by 2034
• Annuitisation — converts pot to spouse-transferable income that doesn't count as estate
• Spend-down strategies — order of withdrawal across SIPP / ISA / GIA matters now

The first wave of Making Tax Digital for Income Tax Self Assessment launches 6 April 2026 for sole traders and landlords with qualifying income above £50,000. Quarterly digital updates replace one annual Self Assessment.

• Who's in from April 2026: sole traders + landlords with combined trading + property income > £50,000
• Who's in from April 2027: threshold drops to £30,000
• Filing cadence: 4 quarterly updates + an end-of-period statement + a final declaration (replaces SA100)
• Software: must use HMRC-recognised MTD-compatible software; spreadsheets work via bridging tools