The new tax year has crept up on us, and several changes to UK tax rules have now come into effect. We have summarised the key updates below so that you can understand these changes in a straightforward and easy‑to‑digest way.

Income tax and personal allowances

A personal allowance is the amount you earn before paying income tax. Since 2021 it has been frozen at £12,570 and will remain at this amount until at least 2028.

As wages and inflation continue to rise, more people are moving into higher tax bands or ‘fiscal drag’ as it is more commonly referred to. We suggest reviewing your income planning, especially if you are approaching the threshold, as seen below:

• Basic rate (20%): £12,570-£50,270
• Higher rate (40%): £50,271-£125,140
• Additional rate (45%): above £125,140

Please note that the personal allowance is gradually withdrawn for income earned above £100,000. This creates an effective 60% marginal rate between £100,000 and £125,140. If you fall into this bracket, pension contributions or Gift Aid donations may be worth considering.

National Insurance Contributions

Employers NIC:

Employers NIC is one of the more notable changes coming into effect and will affect almost all businesses with employees

• The employer NIC rate will rise from 13.8% to 15%
• The secondary threshold (the point from which employers pay NICs) will fall from £9,100 to £5,000 per year
• The Employment Allowance will increase from £5,000 to £10,500, offsetting the increases for many smaller businesses

In summary, this means that most businesses will see a higher employer NIC bill from 1 April. At PennyBooks, we recommend reviewing your payroll costs and considering remuneration restructuring, for example: the use of salary sacrifice arrangements.

Employee NICs

The employee thresholds will remain mostly unchanged. Employees will continue to pay 8% on earnings between £12,570 and £50,270 and 2% above that.

Capital Gains Tax (CGT)

Business Asset Disposal Relief (BADR) – Increase in rates

The Business Asset Disposal Relief formally known as Entrepreneurs Relief, provides a reduced capital gains tax rate on qualifying business disposals. As of 6 April 2026, the rate has increased.

• 2025/26 rate: 14%
• 6 April 2026: 18%

BADR’s lifetime allowance will remain at £1million. If you are considering selling your business or shares, we advise that you speak to us as soon as possible to discuss your options.

CGT rates on other assets

The main CGT rates which were increased in October 2024 continue to apply.

• Basic rate taxpayers: 18%, up from 10%
• Higher/additional rate taxpayers: 24%, up from 20%
• Residential property: 18% and 24% (unchanged from the October 2024 increases)

Please note that the annual CGT exempt amount will remain at £3,000. If you plan carefully around your asset disposals, such as the use of a spouse or civil partner’s allowance, this can provide meaningful tax savings

Inheritance Tax (IHT)

Thresholds will remain frozen, with pension assets now in scope

The nil-rate band will remain frozen at £325,000 and the resident’s nil-rate band at £175,000. This gives a maximum combined allowance of £500,000 per individual or £1 million to a married couple or civil partners.

This change comes into effect from April 2027 not April 2026. We suggest on planning now that any unused pension funds and death benefits will be brought within the scope of IHT. If you have significant pension wealth, this is an area we advise you to review with us.

Corporation Tax

No changes to corporation tax rates will come into effect from 6 April 2026, the below rates will continue to apply:

• Small profit rate (up to £50,000): 19%
• Main rate (above £250,000): 25%
• Marginal relief applies for profits between £50,000 and £250,000

The thresholds are divided by a number of associated companies. If you control a number of entities, this can have an effect on the rate you will pay.

Making Tax Digital (MTD)

While we have recently published a blog post explaining MTD, please see below a brief summary of this new change

MTD for income tax

MTD for Income Tax Self-Assessment (MTD for ITSA) will be mandatory from April 2026 for sole traders and landlords with a gross income above £50,000. From April 2027, the threshold will reduce to £30,000, with further expansions planned from there.

Relevant taxpayers will be required to:

• Keep digital records of income and expenses
• Submit quarterly updates to HMRC
• Submit a final year-end declaration

These quarterly updates will need to be submitted through HMRC approved software. We are on hand to help select the best software and solution for your processes. This will ensure you meet the deadlines and are fully compliant.

ISA and Savings

ISA Allowances

The annual ISA allowance will remain at £20,000 per person, this allowance resets on 6 April. If you have not used your 2025/26 allowance, please be aware that you cannot carry this forward.

• Adult ISA: £20,000
• Junior ISA: £9,000
• Lifetime ISA: £4,000 (this counts within the £20,000 limit)

Personal Savings Allowance

The personal savings allowance (PSA) will continue at its current levels, as seen below:

• Basic rate taxpayers: £1,000
• Higher rate taxpayers: £500
• Additional rate taxpayers: £0

Next steps

As many of these changes are already in effect or are fast approaching, we suggest that you review your position, especially across the below areas:

• Payroll costs and employer NIC’s, particularly if your business is growing
• Planned business or asset disposals, the BADR rate increase makes timing critical
• MTD for ITSA, if your gross income is above £50,000
• Pension and IHT planning. Particularly in light of the upcoming pension changes
• Income levels close to key thresholds, a salary, dividend or pension adjustment(s) may prove useful

At PennyBooks, we are here to assist you with any questions or concerns you may have. If you want to know more, send us an email at support@pennybooks.io and we will help you navigate this period of change.

Sarah Morris