Personal tax changes from 6 April 2026 – what you need to know

Published: 15/04/2026 By Hannah Duncan

From 6 April 2026, a number of tax changes came into effect that could impact your income, savings, and long-term planning. Here’s a quick summary of the key updates.

Higher tax on dividends
Dividend tax rates have increased by 2%:

• Basic rate: 10.75% 
• Higher rate: 35.75%
• Additional rate remains 39.35% 

This means company owners and investors will pay more tax on dividend income.

Directors’ loans become more expensive
The tax charge on directors’ loans has risen from 33.75% to 35.75%.
This particularly affects owner-managed businesses using director loan accounts for cash flow.

Business Asset Disposal Relief (BADR) increase
BADR (formerly Entrepreneurs’ Relief) has increased to 18%.
While still beneficial, it reduces the tax advantage when selling a business.

Frozen tax thresholds continue
Income tax thresholds remain frozen until 2031:

• Personal allowance: £12,570 
•  Higher rate (40%): from £50,271
• Additional rate (45%): from £125,140 

With wages rising, more people may be pushed into higher tax brackets.

Inheritance tax changes for businesses and farms
Significant changes to business and agricultural reliefs:

• 100% relief capped at £2.5m
• Above this, relief drops to 50% (effective 20% tax rate) 

Couples can pass on up to £5m, but unmarried couples cannot combine allowances.

Making Tax Digital begins
Mandatory quarterly reporting under Making Tax Digital (MTD) starts for:

• Sole traders
• Landlords
• Self-employed individuals earning over £50,000 

This brings more frequent reporting requirements for around 900,000 taxpayers.

Savings and ISAs

• Personal savings allowance unchanged
• ISAs remain key for tax-free savings 

Future change to note: cash ISA limits are expected to reduce from £20,000 to £12,000 from April 2027 (except over 65s).

Construction and payroll compliance tightened

• CIS rules now require monthly returns, even if no payments are made
• HMRC has stronger powers to tackle fraud
• New rules also tighten responsibility for PAYE in labour supply chains 

State pension and child benefit increases

• State pension rises to £241.30 per week
• Child benefit increases slightly for all children 

While some changes are incremental, others particularly around inheritance tax, dividends, and reporting requirements could have a significant financial impact. Planning ahead and reviewing your tax position is more important than ever.