As we begin 2026 there are a whole host of tax and compliance changes set to come into force this year. Understanding and planning ahead can help you navigate these changes, prepare for them, and in some cases, mitigate their impact.
Here we look at the key changes and what they mean for individuals and businesses.
Personal tax changes in 2026
- Income tax thresholds are frozen: The income tax rates will remain at 20%, 40% and 45%, at which they are set to be frozen until April 2031. This freeze means more taxpayers may find themselves pushed into higher tax brackets in the coming years.
- Dividend tax rates increasing: From April 2026, income tax rates on dividend income will rise to 10.75% from 8.75% for those paying the basic rate of tax, and to 35.75% from 33.75% for those on the higher rate. The additional rate will stay the same at 39.35%.
- ISA limit remains for now: From April 2026, adult savers will again have a £20,000 annual allowance, and those putting money into junior ISAs will have the usual £9,000 allowance. The lifetime ISA allowance will remain at £4,000, but this is part of the £20,000 allowance for adults. However, from April 2027 the ISA annual allowance will reduce from £20,000 to £12,000 for those under 65.
- VCT tax relief reducing: Currently, investors can claim up to 30% tax relief on investments in Venture Capital Trusts (VCTs) for eligible start-ups, up to £200,000. This rate will drop to 20% from 6 April 2026. For example, a £50,000 VCT investment made by April 2026 would generate £15,000 in tax relief, while a similar investment after 6 April would only generate £10,000. However, the VCT and Enterprise Investment Scheme limits for companies are changing, as noted in the business section below.
- Carried interest rates: From 6 April 2026, the tax treatment of carried interest will change. Instead of being subject to Capital Gains Tax (CGT), it will be treated as trading income, subject to Income Tax and Class 4 National Insurance Contributions (NICs). A multiplier of 72.5% will apply to any qualifying carried interest.
- Council Tax to increase: Council tax is projected to increase again in April 2026, with a potential rise of up to 5% without special permission.
- Fuel Duty to increase: The temporary 5p cut to fuel duty is set to begin tapering away from September 2026, until it disappears altogether by March 2027.
Making Tax Digital for landlords and the self-employed
The self-employed and landlords earning over £50,000 annually from their activities, will be required to comply with Making Tax Digital requirements.
From April 2026, there will be mandatory quarterly reporting of income and expenses for these individuals, as well as a “final declaration” of tax affairs to be made by 31 January each year.
You can find out more in our Making Tax Digital guide for the self-employed and landlords here.
Business tax changes in 2026
- Late filing penalties to increase: The standard penalties for late filing of corporation tax returns will double from 1 April 2026.
- Business rates: Major business rates changes are coming into effect from 1 April 2026 in England and Wales, including a nationwide revaluation and the introduction of a new five-tier multiplier system with permanently lower multipliers for eligible properties with an RV under £500,000. Your business’s new rateable value is available to check online here via the GOV.UK website. If you believe the details are wrong, you can raise a “check case” before 31 March 2026. The GOV.UK website also allows you to get an estimate of your future business rates bill.
- Capital allowances: From April 2026 the main rate of writing down allowance for plant and machinery will decrease from 18% to 14%, although a new 40% first-year allowance for certain main pool additions will be introduced. The new FYA will be available for expenditure incurred from 1 January 2026. Unlike full expensing, the new allowance will be available for unincorporated businesses and assets used for leasing.
- VCTs and EIS: From 6 April 2026 there will be increases to the gross assets and investment limits for qualifying companies to help them access more growth capital:
- Gross Assets Limit Increased to £30m before share issue and £35m after (previously £15m/£16m).
- Annual Investment Limit Increased to £10m (previously £5m), or £20m for Knowledge-Intensive Companies (KICs) (previously £10m).
- Lifetime Investment Limit Increased to £24m (previously £12m), or £40m for KICs (previously £20m).
- Business Property Relief (BPR) and Agricultural Property Relief (APR): In December the Chancellor scaled back a proposed reduction to inheritance tax (IHT) relief for agricultural and business properties. The new threshold, which was originally set to drop to £1 million from April 2026, will now be raised to £2.5 million for individuals, allowing couples to transfer up to £5 million in agricultural or business property without incurring IHT. Under the revised plan, the 100% relief rate will be set at £2.5 million per individual, with a 50% relief rate applying beyond that. This means a couple will now be able to pass on up to £5 million of agricultural or business property between them, in addition to existing tax exemptions such as the nil-rate band. You can find out more about this announcement here.
Business compliance changes in 2026
- Major lease accounting changes: If your business holds operating leases – such as for leasehold offices, shops, restaurants, hotels, vehicles or equipment – significant changes have come into force which will impact your financial reporting. For accounting periods beginning on or after 1 January 2026 businesses reporting under FRS 102, lease payments will no longer be expensed as a charge against income, and therefore allowable for corporation tax deductions in the profit and loss accounts. You will now need to recognise them on the face of the balance sheet – as both a right of use asset and a lease liability. You can find out more about this change here.
- Transfer pricing: The government is introducing a package of legislation in respect of the UK’s rules on transfer pricing, permanent establishment, and Diverted Profits Tax effective from accounting periods beginning on or after 1 January 2026. This will impact all foreign companies with UK permanent establishments and all UK resident businesses within or potentially within scope of the transfer pricing or Diverted Profits Tax legislation.
- Buy now pay later (BNPL) services are set to be regulated: From 15 July 2026, Buy Now Pay Later (BNPL) services will be regulated by the Financial Conduct Authority (FCA). This means that BNPL payment providers such as Klarna, Paypal and Clearpay, who offer short-term financing options, will need to meet stricter affordability checks and consumer will have enhanced protections, such as the ability to take complaints to the Financial Ombudsman Service and protection under Section 75 of the Consumer Credit Act. Businesses offering BNPL payment options, should therefore ensure their chosen providers are compliant, and be aware that there will be stricter affordability checks to ensure customers can afford repayments.
Plan ahead for the end of the tax year
In February we will be publishing our Year End Tax Planning Guide, which highlights some of the key tax reliefs and planning opportunities to consider before 5 April 2026.
You can subscribe to receive our Year End Tax Planning Guide here.
Award-winning chartered accountants offering tax, audit and advisory services.
