Five Key Tax Changes Effective April 6 Impacting Millions in the UK
The dawn of the new tax year on April 6, 2026, heralds significant tax reforms that will affect millions of people across the United Kingdom. Unlike the calendar year, the tax year runs from April 6 to April 5 the following year, resetting personal tax allowances, ISA limits, and pension allowances. It also introduces new PAYE tax codes for employees. Here are the five crucial changes you need to be aware of starting next month.
Making Tax Digital
Sole traders and landlords with an annual income exceeding £50,000 will be required to maintain digital records and submit quarterly tax updates from April 2026. This new process, known as Making Tax Digital, mandates the use of compatible software to store information on income, expenses, VAT for VAT-registered entities, and tax adjustments.
Inheritance Tax
Changes to agricultural and business property reliefs for Inheritance Tax purposes will be implemented in April 2026. A new cap of £2.5 million will be introduced, up from £1 million, before Inheritance Tax is due. For assets above this threshold, only 50% tax relief will apply, with the standard Inheritance Tax rate remaining at 40%.
Dividend Tax
The Dividend Tax rate will increase from 8.75% to 10.75% for basic rate taxpayers and from 33.75% to 35.75% for higher rate taxpayers, following announcements in the Budget. A dividend is a distribution of profits made by a company to its shareholders, making this change particularly relevant for investors.
Work from Home Relief
From April 2026, individuals who work from home will no longer be able to claim tax relief from HMRC for extra household costs, such as gas and electricity. The work from home allowance in the UK is a flat rate of £6 per week, and under current rules, claims are only permitted if there is no office to attend, not for those choosing remote work.
Capital Gains Tax
The rate of Capital Gains Tax applicable to Business Asset Disposal Relief and Investors’ Relief will rise from 14% to 18% starting April 2026. The £1 million lifetime limit for these reliefs remains unchanged, meaning entrepreneurs and investors will face higher taxes on qualifying business sales.
