HMRC's April 2026 Tax Year Changes: What You Need to Know
The new financial year for 2026/27 commences this week, introducing a series of pivotal tax updates from HMRC that will impact millions of individuals across the United Kingdom. Unlike the calendar year, the tax year runs from April to March, with this cycle starting on Monday, April 6, 2026. These adjustments span from income tax and National Insurance to inheritance tax and employee reliefs, requiring careful attention from taxpayers.
Income Tax Thresholds Frozen Until 2031
One of the most significant changes is the continuation of the income tax freeze, which has been extended until at least April 2031. This marks a decade since the last increase in April 2021, when the personal allowance was set at £12,570. For the 2026/27 tax year, the tax-free personal allowance remains at £12,570, with the thresholds for higher and additional rate taxes in England, Wales, and Northern Ireland also unchanged.
The Association of Taxation Technicians (ATT), a leading professional charity for UK tax compliance services, warns that this freeze effectively constitutes a tax cut. "Freezing the personal allowance and tax rate thresholds means they are not keeping up with inflation," the ATT states. "Where incomes rise with inflation, individuals get to keep less of any extra income they receive each year, and more taxpayers are brought into higher- and additional-rate tax bands."
National Insurance Contributions Unchanged
National Insurance Contributions (NICs) see no alterations in main thresholds and rates for the 2026/27 period. Workers aged 16 or over earning more than £242 per week or £1,048 per month, along with their employers, will continue to pay Class 1 National Insurance, deducted automatically via PAYE.
- For most employees, the main rate on earnings between £12,570 and £50,270 remains at 8%, with a 2% rate on earnings above £50,270.
- Employers will pay Class 1 NICs at 15% on earnings over £5,000 per year, including on most benefits in kind provided to employees.
- Self-employed individuals paying Class 4 contributions will see rates unchanged at 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270.
The ATT highlights that voluntary National Insurance contributions for those based overseas will become more expensive from April 2026, with eligibility criteria also becoming more restrictive, potentially affecting UK State Pension entitlements.
Inheritance Tax Reforms and Freezes
Inheritance Tax (IHT) undergoes a significant change starting April 6, 2026, particularly impacting business owners and farmers. The amount of property eligible for 100% Agricultural Relief and 100% Business Relief is now capped at £2.5 million per individual, with a 50% relief rate applying to assets above this limit.
Additionally, the November 2025 Budget extended the freeze on all IHT nil-rate bands through to April 2031. "By that time, the main nil-rate band will have remained at £325,000 for 21 years, meaning more estates have had to pay IHT as asset values have risen," advises the ATT.
Investment Income and Capital Gains Adjustments
For individuals with savings or investments, several updates are noteworthy. The tax-free dividend allowance for shares not held in an Individual Savings Account (ISA) stays at £500 for 2026/27, but tax rates on non-ISA dividend income above this amount will increase by 2% for basic and higher rate taxpayers.
- Basic rate taxpayers will pay 10.75% (previously 8.75%) on dividend income.
- Higher rate taxpayers will pay 35.75% (previously 33.75%).
- Additional rate taxpayers continue at 39.35%, with no increase.
The Personal Savings Allowance remains unchanged, with basic rate taxpayers entitled to £1,000 tax-free on non-ISA interest income, and higher-rate taxpayers to £500. Additional rate taxpayers receive no allowance. ISA limits hold at £20,000 for 2026/27, but from April 2027, cash ISA contributions for those under 65 will drop to £12,000, making the current year crucial for maximising balances.
Capital Gains Tax sees the annual exemption fixed at £3,000, with rates steady at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers.
Employee Tax Exemptions and Reliefs
Two major changes affect employee tax exemptions and reliefs. From April 6, 2026, employers can reimburse employees tax-free for flu vaccines, eye tests, or home-working equipment without incurring tax or NIC liabilities, a shift from previous rules requiring direct employer payment.
However, a less welcome update concerns home-working tax relief. "From the 2026/27 tax year, employers can still reimburse their employees tax-free for additional home-working costs," explains the ATT. "But for employees who work from home and whose employers do not offer this reimbursement, it will no longer be possible to claim tax relief for additional costs of working at home." This ends the ability for many to claim the £6 per week flat-rate relief, impacting those without employer support.
As the new tax year unfolds, these HMRC updates underscore the importance of staying informed to navigate the financial landscape effectively, with implications for income, investments, and workplace benefits across the UK.
