How to Prepare Your Finances for the 2026/27 Tax Year

April 6, 2026 is the tax change wall. That's when dividends get taxed more, when MTD kicks in for the self-employed, when homeworking relief disappears. It's a lot hitting at once, and it's not abstract — it touches most people's finances somewhere. You can't avoid it, but you can prepare. Here's what actually matters.

The Key Changes from April 2026

1. Income tax thresholds — still frozen

The personal allowance (£12,570), higher-rate threshold (£50,270), and additional-rate threshold (£125,140) remain frozen until 2031. This means fiscal drag continues: any pay rise pushes more of your income into higher tax bands.

2. Dividend tax rates increase

Band	2025/26	2026/27
Basic rate	8.75%	10.75%
Higher rate	33.75%	35.75%
Additional rate	39.35%	39.35%

The £500 dividend allowance is unchanged.

3. Savings and property income tax increases (April 2027)

From April 2027, tax rates on savings income and property income will rise by two percentage points across all bands (to 22%, 42%, and 47%). This happens a year after the dividend tax increase.

4. Making Tax Digital for Income Tax

Mandatory quarterly reporting for self-employed individuals and landlords with income above £50,000. You will need MTD-compatible software and must submit digital updates four times a year.

5. Homeworking expenses relief removed

The £6/week flat-rate tax relief for working from home is no longer available from April 2026.

6. National Living Wage increases to £12.71/hr

A 4.1% increase for workers aged 21 and over.

7. Inheritance tax — APR/BPR reform

Agricultural and business property relief capped at £2.5 million for 100% relief (50% thereafter).

8. Benefit-in-Kind for electric vehicles

The BiK rate for electric vehicles rises from 3% to 4% from April 2026. The expensive car supplement threshold for EVs increases to £50,000.

Your Pre-April Checklist

For everyone

• Use your 2025/26 ISA allowance — You have until 5 April to contribute up to £20,000 across Cash and Stocks & Shares ISAs. Interest and dividends inside an ISA remain tax-free.

• Check your tax code — Log in to your Personal Tax Account and ensure your code is correct. A wrong code means incorrect tax deductions all year.

• Review pension contributions — Pension contributions reduce your taxable income and attract tax relief. The annual allowance is £60,000, and unused allowance from the last three years can be carried forward. This is the most effective tool against fiscal drag.

• Use your £3,000 CGT allowance — If you have investments with unrealised gains outside an ISA, consider realising up to £3,000 before 5 April. The allowance cannot be carried forward.

• Claim Marriage Allowance — If one partner earns less than £12,570 and the other is a basic-rate taxpayer, claim up to £252/year via GOV.UK.

For investors and company directors

• Move dividend-paying investments into ISAs — With dividend tax rising, the tax savings from ISA protection are now larger.

• Review salary vs dividend split — If you run a limited company, the higher dividend rates may change the optimal balance. Professional advice is recommended for your specific situation.

• Review AIM share holdings — AIM shares will only receive 50% inheritance tax relief from April 2026 (down from 100%). Consider whether your IHT planning strategy needs updating.

For the self-employed and landlords

• Sign up for Making Tax Digital — If your qualifying income exceeds £50,000, you must comply from April 2026. Choose MTD-compatible software and set up digital record-keeping.

• Claim homeworking expenses for 2025/26 — This is the last year the relief is available.

• Review your record-keeping — MTD requires digital records of all income and expenses. Get your systems in order before April.

For employees with company cars

• Check your BiK position — If you have a company electric vehicle, the BiK rate rises from 3% to 4%. Check your expected tax bill for 2026/27.

How to Model the Impact

The combination of frozen thresholds, higher dividend and savings taxes, and the loss of homeworking relief creates a cumulative drag on net income. The best way to see the impact on your specific situation is to use our UK salary calculator with your expected 2026/27 income.

You can adjust for pension contributions, student loan type, tax code, and other deductions to get an accurate take-home pay estimate.

State Pension Increase

The basic and new state pension will be uprated by 4.8% from April 2026 under the triple lock, worth up to an additional £575 per year. If you receive the state pension, this partially offsets the impact of frozen income tax thresholds.

Looking Further Ahead

Date	Change
April 2027	ISA cash limit drops to £12,000 (under-65s); MTD extends to £30,000+ income; savings/property income tax rises apply
April 2028	MTD extends to £20,000+ income; high-value council tax surcharge begins
April 2029	Salary sacrifice pension NI cap of £2,000 takes effect
April 2031	Threshold freeze ends (subject to future government decisions)

The Real Impact

Here's what's frustrating: none of these changes individually is catastrophic. A 2 percentage point hike on dividends? Annoying. Homeworking relief gone? Small hit. Frozen thresholds for five more years? You get used to it. But stacked together? They compound. That's why an hour now — checking your tax code, maxing your ISA, reviewing your pension — actually saves hundreds. Maybe thousands. And you'll notice that money not disappearing.