10 Tax Changes from April 2026 That Affect Your Business

The new tax year started on 6 April, and the government has been busy. Some of these changes were announced months ago. Others crept through in the Spring Statement with barely a headline. Either way, they're all live now — and several will hit your pocket.

Here are the 10 changes worth knowing about for 2026/27, starting with the ones most likely to affect how you run your business.

1. Dividend tax rates are up 2% across every band

This is the big one for limited company directors. From 6 April, dividend tax rates have increased by two percentage points at every level:

• Basic rate: 8.75% → 10.75%
• Higher rate: 33.75% → 35.75%
• Additional rate: 39.35% → 41.35%

The £500 dividend allowance hasn't changed, but that's barely worth mentioning at this point. For a director taking £60,000 in dividends on top of a modest salary, the extra 2% adds roughly £1,200 to the annual tax bill. That's real money.

If you're extracting profits through dividends — and most small company owners are — you'll want to revisit the salary/dividend split. The maths has shifted again.

2. Making Tax Digital for Income Tax is finally live

After years of delays, MTD for Income Tax Self Assessment (ITSA) is now mandatory for sole traders and landlords with gross income over £50,000. If that's you, the annual tax return is no longer enough. You'll need to submit quarterly updates to HMRC through compatible software.

The first quarterly submission window covers April to July, with a deadline in August. Miss it and you're looking at penalties under HMRC's new points-based system.

Those earning between £30,000 and £50,000 will be brought into MTD from April 2027. If you're close to the threshold, start getting your digital records in order now rather than scrambling next year.

3. Business Asset Disposal Relief rate jumps to 18%

Thinking about selling your business? The tax rate on qualifying gains has risen again. Business Asset Disposal Relief (formerly Entrepreneurs' Relief) now charges 18% on the first £1 million of lifetime gains — up from 14% in 2025/26, and a far cry from the 10% rate that applied before March 2025.

That's an 80% increase in the effective tax rate in just two years. For someone selling a business with £500,000 of qualifying gains, the tax bill has gone from £50,000 to £90,000.

If you're planning an exit in the next few years, this is a conversation to have with your accountant sooner rather than later. The relief still exists, but it's worth a lot less than it used to be.

4. National Living Wage goes up — again

The National Living Wage for workers aged 21 and over has risen to £12.71 per hour, up from £12.21. For 18-20 year olds, the rate jumps to £10.85 (up from £10.00, a significant 8.5% increase).

If you employ staff on or near the minimum wage, your payroll costs just went up. For a full-time employee on the NLW, that's an extra £975 a year before you factor in the employer NIC on the increase.

Worth reviewing your rates now if you haven't already adjusted them.

5. Working from home allowance scrapped

The flat-rate allowance of £6 per week (£312/year) for working from home — which you could claim without receipts — has been removed entirely from 6 April 2026.

If you're a sole trader who works from home, you can still claim a proportion of your actual household costs (heating, broadband, a share of the rent or mortgage interest). But you'll need records to back it up. The days of claiming a blanket £6/week with no questions asked are over.

For employees who work from home, the position is the same: the flat-rate deduction is gone. Your employer can still reimburse you for actual costs, but the simple tax relief has been pulled.

6. Writing-down allowance for plant and machinery cut to 14%

The writing-down allowance (WDA) on the main pool of plant and machinery has been reduced from 18% to 14%. This affects businesses that spread the cost of capital assets over several years rather than claiming full Annual Investment Allowance in year one.

For most small businesses spending under the £1 million AIA cap, this won't matter much — you can still claim the full cost in the year of purchase. But if you're running a capital-intensive business with significant assets in the main pool, you'll write off those costs more slowly from now on.

7. Inheritance Tax: Agricultural and Business Relief capped

From April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) are subject to a combined cap of £2.5 million per individual. Assets above that threshold receive only 50% relief instead of 100%.

This is a major change for family businesses and farming operations. A business valued at £4 million would previously have attracted full BPR, meaning zero IHT on the business assets. Now, £1.5 million of that value is only 50% relieved — creating a potential IHT liability of up to £300,000.

If you're a business owner thinking about succession planning, this cap changes the calculation significantly. Life insurance, trusts, and gifting strategies all need revisiting.

8. Personal allowance and higher rate threshold: still frozen

No surprises here. The personal allowance stays at £12,570 and the higher rate threshold remains at £50,270. They've been frozen since 2021/22, and they'll stay frozen until at least 2028.

The effect is straightforward: as wages and profits rise with inflation, more income gets taxed at higher rates. This is fiscal drag — a stealth tax increase without changing any headline rates. The OBR estimates that the ongoing freeze will pull around 3.7 million more people into higher rate tax by the time it ends.

If your turnover or salary has grown at all over the past five years, you're almost certainly paying a higher effective tax rate than you were in 2021, even though the "rates" haven't changed.

9. Corporation tax rates unchanged — but the picture shifts

Corporation tax rates themselves haven't moved. Small profits up to £50,000 are still taxed at 19%, profits above £250,000 at 25%, with marginal relief in between.

But here's what's changed around them: the dividend tax hike (point 1) means extracting profit as dividends is more expensive. The frozen personal allowance means taking a higher salary pushes more income into the 40% band. And employer NIC at 15% on a secondary threshold of just £96/week makes salary expensive for the company too.

The rates are the same. The planning around them isn't.

10. State pension rises, but tax thresholds don't

The full new State Pension has risen to £11,975 per year under the triple lock, up from £11,502. That's still just under the personal allowance of £12,570, so most pensioners with only the State Pension won't pay income tax on it.

But add any private pension, rental income, savings interest, or part-time earnings on top, and the numbers tip quickly. With the personal allowance frozen, a growing number of pensioners are being pulled into income tax for the first time — or pushed from basic rate into higher rate.

If you're a business owner drawing a State Pension alongside company dividends, the combined effect of the pension increase and the dividend tax hike is worth modelling carefully.

What actually matters for most small businesses

Not all ten of these changes will affect you equally. For most small business owners, three things stand out:

The dividend tax increase is the most immediately painful for anyone running a limited company. A 2% rise doesn't sound dramatic until you multiply it across a year's worth of dividends.

MTD for Income Tax is a process change, not a rate change — but it's the one most likely to catch people off guard. If you're a sole trader above £50,000 and you haven't set up quarterly reporting yet, that needs to happen now.

The frozen thresholds are the slow burn. They don't make headlines, but they're doing more to increase your tax bill year on year than any single rate change.

If you haven't spoken to your accountant since January, now's a good time. The new tax year is here, and the rules have changed.