Key UK Tax Changes for Businesses and Individuals in 2026/27: What You Need to Know
The 2026/27 tax year has brought several important changes for business owners, landlords, sole traders, company directors and individual taxpayers.
Some of the headline tax rates have remained unchanged, but that does not mean there is nothing to plan for. Making Tax Digital for Income Tax has now begun, dividend tax rates have increased, new capital allowance rules are in force and the Personal Allowance remains frozen.
HMRC also announced a wider package of tax simplification and modernisation measures in June 2026, signalling further changes to tax administration over the coming years.
Understanding which changes affect you can help you stay compliant, manage cash flow and make better-informed financial decisions.
Here are some of the key UK tax changes for 2026/27.
1. Making Tax Digital for Income Tax Is Now Live
One of the biggest practical changes for 2026/27 is the introduction of Making Tax Digital for Income Tax (MTD IT).
From 6 April 2026, individuals registered for Self Assessment who receive qualifying gross income of more than £50,000 from self-employment, property income or a combination of the two are required to use Making Tax Digital.
Under the new system, affected taxpayers need to:
- Keep digital records of relevant business and property income and expenses
- Use MTD-compatible software
- Send quarterly updates to HMRC
- Complete the required year-end finalisation process
- Continue paying the tax due by the usual Self Assessment deadline
The reporting threshold will reduce further in future years: qualifying income above £30,000 is scheduled to come within MTD from April 2027, followed by income above £20,000 from April 2028. Hartley Fowler’s own 2026/27 Tax Facts guidance reflects the same phased timetable.
For sole traders and landlords affected in 2026/27, digital record keeping is therefore no longer something to prepare for at a future date — it is now part of their current tax compliance obligations.
2. Dividend Tax Rates Have Increased
Company directors and investors receiving dividends should also review their position.
From 6 April 2026, the dividend ordinary rate increased to 10.75%, while the dividend upper rate increased to 35.75%. The additional dividend rate remains 39.35%. The Dividend Allowance remains at £500.
For owner-managed companies, this makes reviewing the balance between salary, dividends, pension contributions and other forms of remuneration particularly important.
There is no single remuneration strategy that works for every director. Company profitability, other sources of personal income, National Insurance, pension objectives and available distributable reserves all need to be considered together.
3. The Personal Allowance Remains Frozen
Contrary to some commentary suggesting an inflationary increase, the standard Personal Allowance for 2026/27 remains £12,570.
For taxpayers in England, Wales and Northern Ireland, the basic-rate band continues to run to taxable income of £37,700, meaning the higher 40% rate generally begins once total income exceeds £50,270 for someone receiving the full Personal Allowance. The additional 45% rate applies above £125,140. Scotland has separate Income Tax bands and rates.
The Personal Allowance also continues to reduce by £1 for every £2 of adjusted net income above £100,000 and is completely removed once income reaches £125,140.
Because thresholds remain frozen while earnings may rise, individuals can move into higher tax bands even without a change in the headline rates.
This makes pension contributions, charitable giving and wider personal tax planning for 2026/27 worth reviewing where appropriate.
4. Corporation Tax Rates Are Unchanged
There has been no new increase in the standard Corporation Tax rates for the financial year beginning 1 April 2026.
The main Corporation Tax rate remains 25% for companies with profits above £250,000, while the small profits rate remains 19% for companies with profits of £50,000 or less. Companies with profits between those levels may qualify for Marginal Relief.
The £50,000 and £250,000 thresholds can be reduced where a company has associated companies, so groups and businesses operating through multiple companies should not automatically assume the standard limits apply to each company independently. Hartley Fowler’s current Tax Facts guide also highlights the impact associated companies can have on these thresholds.
Even though the headline rates have not changed, forecasting taxable profits remains an important part of Corporation Tax planning.
5. Capital Allowance Rules Have Changed
Businesses investing in plant and machinery should pay particular attention to the 2026 capital allowance changes.
A new permanent 40% first-year allowance was introduced for qualifying main-rate expenditure incurred from 1 January 2026. The measure is designed to extend accelerated relief to certain investment that may not qualify for existing first-year allowances, including some expenditure by unincorporated businesses and leasing businesses.
At the same time, the main writing-down allowance for plant and machinery has fallen from 18% to 14%, effective from 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax.
The Annual Investment Allowance remains available and can provide 100% relief on up to £1 million of qualifying expenditure, while companies may also have access to full expensing for appropriate investment.
Businesses planning substantial equipment purchases should therefore consider the available allowances before deciding when and how to invest.
6. Business Mileage Rates Have Increased
There is also a useful change for employees using their own cars for business journeys.
For 2026/27, HMRC’s approved mileage allowance for cars has increased from 45p to 55p per mile for the first 10,000 business miles in a tax year. The rate remains 25p per mile for subsequent mileage.
For National Insurance purposes, the approved rate is 55p for all business miles.
This is relevant to employers reviewing expense policies as well as employees who regularly use personal vehicles for qualifying business travel.
7. Employers Should Continue to Monitor Payroll Costs
For 2026/27, the standard employer National Insurance rate is 15%, with the secondary threshold remaining at £5,000 a year. Eligible employers can reduce their National Insurance liability through an Employment Allowance of up to £10,500.
These figures are particularly relevant when budgeting for recruitment, salaries, bonuses and benefits.
Employers should also ensure their payroll systems have been updated for the latest thresholds and statutory payment rates.
What Should Businesses and Individuals Do Now?
Rather than waiting until the end of the tax year, consider reviewing your position while there is still time to act.
Areas worth discussing with your accountant may include:
- Whether Making Tax Digital applies to you
- Director salary and dividend planning
- Pension contributions
- Planned capital expenditure
- Availability of capital allowances
- Business mileage and employee expenses
- Corporation Tax forecasts
- Personal Income Tax exposure
- Available reliefs and allowances
- Business structure and future investment plans
Tax planning is most effective when decisions are made before transactions take place, rather than after the year end when many opportunities may already have passed.
Frequently Asked Questions
Has the Personal Allowance increased for 2026/27?
No. The standard Personal Allowance remains £12,570 for 2026/27.
What is the Corporation Tax rate for 2026?
The main Corporation Tax rate remains 25%, with a 19% small profits rate for qualifying companies with profits of £50,000 or less. Marginal Relief may apply between £50,000 and £250,000.
Who needs to use Making Tax Digital in 2026?
From 6 April 2026, MTD for Income Tax applies to qualifying sole traders and landlords with combined gross self-employment and property income above £50,000, subject to the detailed eligibility rules and exemptions.
Have dividend tax rates changed?
Yes. From 6 April 2026, the ordinary dividend rate is 10.75% and the upper rate is 35.75%. The additional rate remains 39.35%.
Prepare for the 2026/27 Tax Year With Hartley Fowler
The UK tax changes for 2026/27 affect different taxpayers in different ways. A landlord entering Making Tax Digital has very different priorities from a company director reviewing dividend payments or a business investing in new equipment.
Hartley Fowler provides tax planning, Corporation Tax, Self Assessment and business advisory services from its Wimbledon office, helping businesses and individuals understand their obligations and plan their financial affairs efficiently.
You can also use Hartley Fowler’s Business and Tax Centre for tax rates, calculators, helpsheets and other useful resources.
For advice based on your individual circumstances, contact Hartley Fowler on 020 8946 1212 or arrange an initial consultation.
Tax legislation and HMRC guidance can change. This article provides general information only and should not be treated as personalised tax advice.