13 tax changes in 2026 – which taxes are going up?
As 2026 gets underway, we look at what lies ahead in terms of changes to tax rates and allowances this year and how it will affect you.
A range of tax rises will come into force this year that could add to what you owe HM Revenue & Customs (HMRC).
While it’s not possible to avoid these tax rises, there are steps you can take which could reduce what you will need to pay. Being prepared for these changes is crucial to staying in control of your money in 2026.
Here are 13 taxes rising this year – and how to minimise those increases.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
1. Dividend income tax
The tax rates on income from dividends – which are separate to your standard income tax bill – will increase by two percentage points in April this year. Dividend tax is charged at three separate rates depending on what rate of income tax you pay. Dividend income tax for basic rate taxpayers will rise from 8.75% to 10.75% and for higher rate taxpayers it will rise from 33.75% to 35.75%.
For those who pay additional rate income tax, the dividend tax charge will remain unchanged at 39.35%.
You can earn up to £500 in dividend income in a tax year without paying any tax on it, regardless of your income tax band.
If you earn more than this each year, your bills will rise from 6 April.
How to take action
There are steps you can take to reduce your tax bills on dividends. Ensuring you use your ISA allowance is a no-brainer, as dividend income (and growth) is tax-free on money held in an ISA. If you hold dividend-producing shares outside an ISA, you can move them inside, if you have any unused ISA allowance for this year. Otherwise you can wait until the allowance resets when the new tax year begins on 6 April.
2. Capital gains tax (CGT) on business assets
The rate of capital gains tax (CGT) where business asset disposal relief (BADR) applies will increase from April. So if you’re planning to sell business assets this year, you should know that 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 will increase from 14% to 18%.
How to take action
If you have business assets to sell it might be tax efficient to sell them before the end of the tax year. This depends on your wider tax situation of course.
3. Income tax
The rate at which we pay income tax will not rise in 2026, but many people will pay more income tax.
That’s because, without an annual increase to the thresholds (for England and Wales) within which we pay income tax – and the tax-free personal allowance currently frozen at £12,570 – our bills rise.
The government policy of freezing the thresholds – rather than increasing them in line with the cost of living – is known as fiscal drag.
In England, Wales and Northern Ireland, taxable income between £12,571 to £50,270 is subject to the 20% basic rate, with the 40% higher rate applying on taxable income between £50,271 and £125,140. The additional rate threshold applies on taxable income over £125,140. The freeze of these thresholds will continue until April 2031.
By doing nothing, the government effectively pushes more people into the higher income tax rate bracket, as their wages go up either with an annual pay rise or a promotion offering a bigger salary.
If you live in Scotland, the way that income tax is calculated is slightly different. Everyone still has a £12,570 personal allowance. Then there are tiers – starter rate, basic rate and intermediate rate. There are no changes to the current Scottish income tax rates or the introduction of new bands this year.
Scottish workers will also be subject to the effects of fiscal drag.
How to take action
One of the most effective ways to reduce your income tax bill is by increasing your pension contributions. You can either speak to your employer about increasing contributions to a workplace pension scheme or contribute to a self-invested personal pension (Sipp). The latter is also the option if you’re self-employed.
4. VCT investments
Upfront income tax relief on VCTs will fall from 30% to 20% from 6 April 2026, reducing the incentive for some investors. VCTs (venture capital trusts) are a type of investment that allow you to back small UK businesses. You buy shares in a VCT, which is a fund that invests in a basket of typically 40-80 privately owned fast-growing companies.
For every pound you invest in a VCT you can get up to 30p back in tax relief – upfront. There’s tax-free capital gains and dividends, which means you can boost your income without increasing your taxable income.
For those who don’t need the income, the dividends can also be reinvested into new VCT shares, potentially providing an additional 30% tax relief – or 20% after 6 April.
You can invest up to £200,000 into a VCT each year.
How to take action
If you want to invest in a VCT, do so before April to enjoy higher tax relief. But don’t just invest for the tax benefits. Make sure you understand the risks.
5. Air passenger duty
From 1 April 2026, Air Passenger Duty (APD) rates will increase again, adding to flight costs, with higher rises for long-haul.
It will add up to £2 to the cost of a short-haul economy flight and £4 to that of a short-haul flight in premium or business class cabins. Airlines collect APD as part of their ticket price.
How to take action
Make sure you get the best deal on flights by checking comparison websites and being flexible with departure days if you can.
6. Work from home tax relief
Employees who work from home will no longer be able to claim tax relief from HMRC for extra, non-reimbursed household costs, such as gas and electricity.
7. Benefit in kind tax
Benefit in Kind (BiK) is a tax you pay when you buy a car through your company’s salary sacrifice scheme. BiK rates, like vehicle excise duty, are dependent upon your car’s CO2 emissions.
BiK rates are scheduled to increase again by 1% in the 2026-27 financial year. From 6 April 2026 onwards, electric vehicles will pay 4% BiK instead of the current 3%.
Household bills
Households will see a number of bill hikes in 2026, starting with the energy price cap rising on 1 January.
How to take action
Make sure you are in control of your household bills by keeping a close eye on what you’re paying for each utility, subscription and service. When you reach the end of a contract on any element of your household bills, call up and see what offers you’re eligible for.
8. Energy bills
From the beginning of the year to 31 March 2026, there will be a small monthly increase for energy bills. The average household on the energy price cap is now paying 0.2% more for their energy than they did in the last quarter of 2025.
A typical household on a dual-fuel variable energy tariff paying by direct debit will pay £1,758 a year until 31 March. This is £3 more than under the previous price cap.
How to take action
Consider a smart meter which can help you understand where most of your energy use comes from and work out ways to reduce that usage where you can.
9. Water
Further increases are planned for water bills in 2026/27 and beyond that will be announced in the coming weeks.
How to take action
If you don’t have a water meter, but you think you use less water than you pay for, you can ask to have a water meter fitted for free. The Consumer Council for Water has a calculator to show you whether a water meter could save you money.
10. Council tax
Most households (in England) will likely see a hike to the amount they pay in council tax this year. From April, tax bills are likely to rise by an average of 5% across most local authorities, which is usually the maximum rise permitted. However, permission for much higher hikes for 2026 has been given to some local authorities due to funding cuts and low existing rates. These include some London boroughs as well as Maidenhead and Windsor.
11. TV licence
The TV licence fee is expected to rise in April, but it is yet to be confirmed. Currently, a colour licence costs £174.50. A black and white licence costs £58.50.
12. Fuel
The fuel duty freeze, which has been in place since January 2011, will be phased out from September 2026 onwards, when fuel duty will increase annually in lines with inflation.
13. Alcohol duty
The cost of your favourite tipple might rise next month. All alcohol duty rates will rise in line with the retail price index (RPI) at 3.66% in February. That works out at about 11p on a bottle of Prosecco, 13p on a typical red wine and 38p on a bottle of spirits, according to the Wine & Spirit Trade Association.
We list the key money dates for 2026 in a separate piece.
Join more than 165,000 subscribers and keep yourself informed with the latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Holly Thomas is a freelance financial journalist covering personal finance and investments.
She has written for a number of papers, including The Times, The Sunday Times and the Daily Mail.
Previously she worked as deputy personal finance editor at The Sunday Times, Money Editor at the Daily/Sunday Express and also at Financial Times Business.
She has won Investment Freelance Journalist of the Year at the Aegon Asset Management Media Awards in November 2021.