New tax year changes: how much do you have to pay in 2026/27?
The new tax year brings with it numerous tax hikes. We look at what is changing and how it will affect you.
Daniel Hilton
The new financial year has begun, bringing with it several tax changes that could affect business owners and investors.
The start of the 2026/27 tax year was 6 April, and with it comes a range of tax rises, allowance changes, and fee hikes.
While there aren’t any major changes to the main forms of taxation in the UK (income tax and national insurance), the adjustments that have been made still have the potential to take a bite out of your income.
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1. Income tax rises
While the rate of income tax has not technically increased this tax year, you will still likely pay more than in previous years.
This is because the basic, higher, and additional rate income tax thresholds have remained frozen at their 2022/23 tax year levels, and they will remain unchanged until at least April 2031.
Frozen thresholds cause a phenomenon called “fiscal drag”, where wages increase with inflation but thresholds don’t. This means workers are dragged into higher tax bands despite not earning significantly more in real terms.
Ultimately it means more of your income is taxed, bringing in more revenue for the government.
2. Capital gains tax changes
If you’re planning to sell business assets during this tax year and beyond, you may find yourself with a higher capital gains tax bill.
This is due to changes to Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) – previously known as Entrepreneur’s Relief.
The tax rate on these gains increased from 10% to 14% on 6 April 2025, and has risen again from 14% to 18% since 6 April, 2026.
3. Dividend tax hikes
Dividend allowances have been falling in recent years. Successive cuts have meant it has fallen from £5,000 in the 2016/17 tax year to just £500 in 2024/25.
The current dividend allowance is still £500, but the tax rates on income from dividends is being hiked, effective from the 2026/27 tax year.
Dividend tax rates have increased from 8.75% to 10.75% for basic rate taxpayers and from 33.75% to 35.75% for higher rate taxpayers.
The top, additional dividend tax rate is unchanged.
4. VCT investment reliefs
In another blow for investors, upfront income tax relief on venture capital trusts (VCTs) has been cut from 30% to 20%.
Previously, for every pound you invested in 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.
5. Air passenger duty
Air Passenger Duty rose on 1 April 2026, adding to flight costs that are already under pressure due to the Iran war.
The changes add £2 to the cost of a short-haul economy flight and £4 to a short-haul flight in premium or business class cabins.
This may not seem like much but it will be on top of expected higher flight costs due to the recent Middle East tensions and the resulting rise in oil and fuel prices
6. Benefit in Kind rates
If you pay for an electric vehicle through salary sacrifice at your work, the tax you pay has now increased.
From 6 April 2026 onwards, electric vehicles pay 4% Benefit in Kind (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 been scrapped for the 2026/27 tax year and staff will instead have to ask to be directly reimbursed.
8. TV licence fee
The TV licence fee increased at the start of April.
The annual cost of a TV colour licence increased from £174.50 to £180 from 1 April 2026 onwards.
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.
