A new tax year always brings changes — some expected, some that catch businesses off guard. Here's your no-nonsense guide to everything that's changing in 2026/27 and what it means for you as a UK small business owner, contractor, landlord or self-employed person.
Income tax thresholds and personal allowance
The personal allowance — the amount you can earn before paying income tax — remains frozen at £12,570 for 2026/27, continuing the freeze that has been in place since 2021/22 and is now scheduled to remain until at least 2028. With wages and profits rising with inflation, this freeze represents a real-terms tax increase for many people, known as "fiscal drag".
The income tax bands for 2026/27 remain:
- Personal allowance: Up to £12,570 — 0%
- Basic rate: £12,571 to £50,270 — 20%
- Higher rate: £50,271 to £125,140 — 40%
- Additional rate: Over £125,140 — 45%
If your income is increasing, it's worth reviewing your tax position to ensure you're making the most of available allowances and reliefs before you cross into a higher band.
National Insurance contributions
For 2026/27, the main rates of National Insurance are:
- Class 1 (employees): 8% on earnings between £12,570 and £50,270; 2% above
- Class 4 (self-employed): 6% on profits between £12,570 and £50,270; 2% above
- Class 2 (self-employed): £3.45 per week (flat rate, if profits exceed the small profits threshold)
The reduction in Class 4 NI that took effect in 2024 has been maintained. Self-employed people are paying less NI than they were a few years ago — but the frozen income tax thresholds mean overall tax bills have still crept up for many.
Corporation tax
The dual-rate corporation tax structure introduced in April 2023 remains in place for 2026/27:
- Small profits rate: 19% on profits up to £50,000
- Main rate: 25% on profits over £250,000
- Marginal relief: A tapered rate applies for profits between £50,000 and £250,000
If your limited company profits are approaching the £50,000 threshold, it's worth planning carefully — pension contributions, timing of income and expense recognition, and capital allowance claims can all affect which rate applies.
Dividend allowance
The dividend allowance — the amount of dividend income you can receive tax-free each year — remains at £500 for 2026/27, having been cut from £2,000 in recent years. For limited company directors drawing dividends, this is a significant reduction from where it stood historically.
Dividend tax rates above the allowance are:
- Basic rate taxpayers: 8.75%
- Higher rate taxpayers: 33.75%
- Additional rate taxpayers: 39.35%
Making Tax Digital — the big one for 2026
From April 2026, Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) becomes mandatory for self-employed people and landlords with annual income above £50,000. This is the most significant change for many of our clients this year.
Under MTD for ITSA, you'll need to:
- Keep digital records using HMRC-approved software
- Submit quarterly updates to HMRC via that software
- File a final declaration at year end (replacing the traditional Self Assessment return)
If you're a NumberCrunch client with income above the threshold, we've already been in touch about this. If you're not yet a client and you're unsure whether you're affected, get in touch and we'll help you prepare.
Capital gains tax
The annual exempt amount for CGT remains at £3,000 for 2026/27. The CGT rates on most assets are 18% (basic rate) and 24% (higher rate), following the changes introduced in the October 2024 Budget. Business Asset Disposal Relief (previously Entrepreneurs' Relief) continues to offer a 10% rate on qualifying business disposals, up to a lifetime limit of £1 million.
ISA and pension allowances
The ISA allowance for 2026/27 is unchanged at £20,000 per person. The pension annual allowance remains at £60,000 (or 100% of earnings if lower), with a money purchase annual allowance of £10,000 if you've already started drawing from your pension. If you haven't maxed out your pension contributions, this is one of the most tax-efficient things you can do — particularly as a limited company director making employer contributions.
What you should do now
The start of a new tax year is the ideal time to review your tax position. Things to consider:
- Are you using your ISA allowance before it resets?
- Have you reviewed your pension contributions?
- If you're self-employed with income above £50,000, are you MTD-ready?
- Is your salary/dividend split still optimally structured?
- Have you claimed all available capital allowances?
If you'd like a tailored review of your tax position for 2026/27, book a free call with one of our accountants.