The government has announced a long list of tax changes, and if you’re a worker, subcontractor, landlord or small business owner, you’ll want to know how these updates affect your take-home pay and long-term plans. The rules stretch across income tax, property income, savings, dividends, pensions and even National Insurance.
This guide walks you through each major update in a way that makes sense, and shows where Tax2u can help you stay compliant and avoid paying more tax than you need to.
1. Important personal and business tax changes you should know about
Personal tax thresholds frozen until 2030–31
Rates aren’t changing, but thresholds are staying frozen for several more years.
What this really means is that as wages rise with inflation, more of your income will creep into higher tax bands. It’s a subtle hit that most people don’t notice right away, but it adds up.
Class 2 national insurance is being reshaped
From 6 April 2026:
- The Small Profits Threshold rises to £7,105
- Voluntary Class 2 NI becomes £3.65 per week
If you’re self-employed and rely on Class 2 NI to secure State Pension qualifying years, this is one to keep an eye on.
Tax on income from assets is going up
The government is leaving wages alone for now, but income from investments is getting more expensive.
Increases take effect from:
- April 2026: Dividends
- April 2027: Savings interest
- April 2027: Property income
The new rates rise by 2% across the board:
- Dividends: 10.75% / 35.75% / 39.35%
- Savings: 22% / 42% / 47%
- Property income: 22% / 42% / 47%
If you receive income from assets, expect higher tax bills.
Capital allowances are changing for businesses
The rules for claiming tax relief on equipment and other capital spend are shifting again.
Key dates:
1 January 2026:
- New 40% first-year allowance for main rate expenditure
April 2026:
- Writing-down allowance drops from 18% to 14%
If you run a business and plan investments, these changes could shift the timing of when it makes sense to buy assets.
2. Income tax and national minimum wage: What’s changing?
Income tax threshold freeze extended to 2031
The government has decided to freeze all income tax thresholds including the Personal Allowance and higher-rate threshold all the way to 2030–31.
Why this matters
When thresholds stay frozen while wages rise with inflation, more people get dragged into higher tax bands. You’re not earning more in real terms, but you’ll pay more tax over time. This is fiscal drag, and it’s now locked in for several years.
National Minimum Wage Increases from April 2026
These are the new rates:
- 21+: £12.21 → £12.71
- 18–20: £10 → £10.85
- 16–17 & apprentices: £7.55 → £8
What this means
- Workers on NMW will see a pay rise.
- Employers will need to budget for higher payroll costs, especially industries with high volumes of low-wage staff.
3. Savings tax: Higher rates and a lower ISA allowance
From 6 April 2027, interest income will be taxed at:
- 22% basic
- 42% higher
- 47% additional
Meanwhile, ISA allowances for under-65s drop from £20,000 to £12,000.
Impact
- Anyone with savings outside an ISA could see higher tax bills.
- Those who rely on ISAs will have less tax-free room to work with.
4. Dividend tax increases: What directors need to know
From 6 April 2026, dividend tax rates move to:
- 10.75% basic
- 35.75% higher
- 39.35% additional
Impact
If you pay yourself mainly in dividends, your overall tax liability will rise. The gap between dividend tax and salary tax is narrowing, so reviewing your remuneration strategy early makes sense.
5. Pension contributions: Salary sacrifice gets a major change
From April 2029, only the first £2,000 of salary sacrifice pension contributions will be exempt from National Insurance.
Anything above that gets hit with NI for both the employer and the employee.
Impact
- High earners who sacrifice more than £2,000 will lose tax efficiency.
- Employers will face higher payroll costs.
- There are concerns this could discourage higher pension contributions.
6. Other important tax updates
Voluntary national insurance: Easier top-ups
New rules will give people more flexible options for filling gaps in their NI record, helpful for anyone wanting to increase their future State Pension.
Homeworking expenses get clearer rules (from April 2026)
Items like equipment, eye tests and flu vaccinations will be exempt from Income Tax and NI when reimbursed by employers.
This reduces admin headaches and gives employees more clarity.
ECOS (company car schemes) tightened
HMRC is closing loopholes in Employee Car Ownership Schemes. Expect higher future Benefit-in-Kind charges if you use one.
Higher penalties for late corporation tax
From April 2026, penalties for late Corporation Tax returns will double.
Companies will need to stay ahead of deadlines.
Digital-only HMRC letters
More HMRC notices will appear only online, meaning you’ll need to check your HMRC account more regularly to avoid missing something important.
7. Additional budget measures you should be aware of
Here are the extra updates you wanted added rewritten to fit smoothly and clearly.
Corporation tax late filing penalties doubling
From 1 April 2026, penalties will be doubled.
This is part of a push toward stricter compliance.
Reduction in capital gains relief: Employee ownership trusts
EOT Capital Gains Tax relief drops from 100% to 50%.
This is a major reduction and will affect people planning to sell a business to an EOT.
Enterprise Management Incentives Expanded
From April 2026:
- Employee limit increases to 500
- Gross assets test rises to £120 million
- Company share option limit increases to £6 million
- Holding period extends to 15 years
EMI becomes more accessible to growing scale-ups a win for recruitment and retention.
VCT and EIS investment rules expanded
From April 2026:
- Investment limits rise
- Knowledge Intensive Companies get even higher limits
- VCT income tax relief drops to 20%
Free apprenticeships for small businesses
The government plans to fully fund apprenticeships for eligible under-25s working in small businesses. More details are coming soon.
Minimum wage rises will affect 2.7 million workers
These new rates will directly impact employer wage bills.
Industries with large entry-level workforces will feel this most.
Making tax digital: Possible payment deadline shake-up
From April 2029, taxpayers with PAYE income may need to pay Self Assessment liabilities in-year via PAYE. A consultation on this will be published in 2026.
The government will also exempt “one very small taxpayer group” from MTD, and delay the start date to April 2027 for some others details still to come.
To learn more about all the changes announced in the Budget, you can read the full report on the government’s website.
How Tax2u can help you navigate all these changes
The landscape is shifting fast. Whether you’re a subcontractor, small business owner, PAYE worker or landlord, early planning keeps you ahead of rising costs.
One-to-one consultation
A 30-minute session (£50 + VAT) where we:
- Review your personal or business situation
- Explain exactly how these changes apply to you
- Give clear, practical next steps
Yearly accounting support
Our yearly service includes:
- Full Self Assessment
- Annual tax planning
- Ongoing support tailored to your situation
➡ Sign up to Yearly Accounting Services