What tax changes are coming in April 2026?

The new tax year introduces a range of changes that could affect how much tax you pay.

These include higher dividend tax rates and changes to Inheritance Tax (IHT). While not everyone will be affected, it’s helpful to understand what’s changing in 2026/27 and where it might apply to you.

Here are some of the key changes to know ahead of the new tax year starting 6 April 2026.

State Pension increase

Each tax year, the State Pension amount increases. This is known as the ‘triple lock guarantee’. It means the State Pension rises in line with the highest of:

• the rate of inflation;
• the increase in average earnings; or
• 2.5%.

From April 6 2026, both the new State Pension and the basic State Pension will rise by 4.8% (in line with the average weekly earnings index).

Making Tax Digital

From 6 April 2026, digital reporting will be a requirement for all sole traders and landlords. This is known as Making Tax Digital (MTD). MTD will replace the traditional Self-Assessment tax return, and it’ll first impact those with a gross income of £50,000. The threshold will then drop to:

• £30,000 in April 2027; and
• £20,000 in April 2028.

You’ll need to sign up for MTD with HMRC - this won’t be automatic. Read up on the changes ahead of 6 April.

New dividend tax rates

When the 2026/27 tax year starts on 6 April, so will a rise in the dividend tax rate.

Dividend taxes are paid by:

• limited company owners who pay themselves via dividends; and
• those who earn dividend income from investments held outside an Individual Savings Account (ISA) or pension. For example, in company shares or funds investing in shares. 

Most people have a £500 annual dividend allowance. This means they can earn £500 a year before paying tax on their earnings.

There are three bands for dividend tax and from April 2026, new rates will apply.

So if you’re a basic rate taxpayer and earn £2,000 in dividends, your tax bill would rise from £131 to £161 in the 2026/27 tax year.

Inheritance Tax changes

From 6 April 2026, IHT relief on agricultural and business property will be reduced.

A new £2.5 million allowance will apply to assets qualifying for 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) combined. Assets exceeding this allowance will no longer be fully exempt from IHT and may face a 20% tax charge. 
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London Stock Exchange Alternative Investment Market (AIM) and private company shares may no longer be fully exempt from IHT. Instead, only half of their value could be tax-free at the time of death.

The government has also published plans for IHT to apply to most unspent pension funds from 6 April 2027. However, the details of how this may work in practice are yet to be confirmed.

Elizabeth Anderson is a Personal Finance Journalist and Editor (Times Money, Telegraph, Metro and i paper).

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.