New tax year changes: how much will you have to pay in 2026/27?
The new tax year starts on 6 April, 2026. We look at how taxes and allowances are changing and how they will affect you.
Changes to dividends and capital gains tax charges could hit investors and business owners as the new financial year begins, while frozen tax thresholds threaten to create fiscal drag.
A range of tax rises will come into force from the new tax year on 6 April.
Workers were hit with national insurance changes and higher stamp duty last year and while there aren’t any major changes to the main rates of tax coming, frozen income tax bands income tax bands will still mean higher bills as wages increase.
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1. Income tax rises
Income tax rates aren’t technically rising.
But the threshold between the basic, higher and additional rate has remained frozen for this tax year and will be until April 2031.
Without an annual increase to the thresholds (for England and Wales) within which we pay income tax, our bills rise.
The policy of not increasing allowances in line with the cost of living – known as fiscal drag – forces millions of earners to pay more tax as wages go up either with an annual pay rise or a promotion offering a bigger salary. It means more people become higher rate taxpayers.
The 40% higher rate threshold starts at £50,270 and 45% additional rate tax starts on earnings above £125,140.
Plus, if your earnings enter the £100,000 to £125,140 bracket, you risk falling into the 60% tax trap.
2. Capital gains tax changes
If you’re planning to sell business assets in the new tax year and beyond, changes to Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) – previously known as Entrepreneur’s Relief – could lead to higher capital gains tax bills.
The tax rate on gains already increased on 6 April 2025 from 10% to 14% and it will rise to 18% in the new tax year, potentially creating higher CGT bills.
3. Dividend tax hikes
Dividend allowances have been falling in recent years.
The current dividend allowance is £500 but the tax rates on income from dividends is going up.
Dividend tax rates are rising from 8.75% to 10.75% for basic rate taxpayers and for higher rate taxpayers it will rise from 33.75% to 35.75%.
4. VCT investment reliefs
In another blow for investors, upfront income tax relief on venture capital trusts (VCTs) will fall from 30% to 20% from 6 April 2026.
Previously, for every pound you invest backing small companies through a VCT, you could get up to 30p back in tax relief – upfront. But that has been reduced to 20p, making the product slightly less attractive although capital gains and dividends remain tax-free.
The tax rate on gains increased on 6 April from 10% to 14%. It will rise in stages, reaching 18% from 6 April 2026.
5. Air passenger duty
Air Passenger Duty is rising from 1 April 2026, which will add to flight costs that are already under pressure due to the Iran war.
The changes will add £2 to the cost of a short-haul economy flight and £4 to a short-haul flight in premium or business class cabins.
6. Benefit in Kind rates
If you pay for an electric vehicle through salary sacrifice at your work, the tax you pay is set to rise.
Benefit in Kind (BiK) rates for electric vehicles will rise in the new tax year by 1%. From 6 April 2026 onwards, electric vehicles will pay 4% BiK, rising to 5% in 2027/28.
7. Work from home tax relief
Employees who had to work from home could previously claim tax relief at £6 per week for extra household costs such as energy bills.
This has now been scrapped and staff will instead have to ask to be directly reimbursed.
8. TV licence fee
The TV licence fee is due to rise in April.
The annual cost of a TV colour licence will increase from £174.50 to £180 from 1 April 2026.
9. Fuel duty
A fuel duty freeze, which has been in place since January 2011, is due to be phased out from September 2026 onwards, when fuel duty will increase annually in line with inflation.
There have been calls to continue the freeze due to rising oil prices amid the tensions in the Middle East but the government has so far refused.
