The UK has introduced a package of tax measures for the 2026/27 tax year, including changes to Inheritance Tax reliefs, Business Asset Disposal Relief, Making Tax Digital for Income Tax, dividend taxation and business rates.
The UK’sĀ 2026/27 tax year introduces a broad package of tax measures taking effect from April 2026, with changes affecting business succession, tax compliance, employment costs, property taxation and employee incentives. Although many of the measures were announced in previous Budgets, they are now entering into force.
Capital gains and dividend taxation
The Business Asset Disposal Relief (BADR) Capital Gains Tax (CGT) rate will increase from 14% to 18% from 6 April 2026, while the lifetime qualifying limit remains GBP 1 million. Dividend tax rates will also rise by 2%, with the basic rate increasing to 10.75% and the higher rate to 35.75%. The dividend allowance will remain at GBP 500. Businesses converting to a corporate structure will also need to claim incorporation relief through their self-assessment return rather than receiving it automatically when qualifying conditions are met.
Digital tax compliance
The new tax year marks the mandatory introduction of Making Tax Digital (MTD) for Income Tax for self-employed individuals and landlords with qualifying gross income above GBP 50,000. Affected taxpayers must maintain digital records and submit quarterly updates to HMRC using compatible software, replacing the single annual tax return. The income threshold is scheduled to reduce to GBP 30,000 from April 2027.
Inheritance tax reforms
From 6 April 2026, the 100% Inheritance Tax (IHT) relief under Agricultural Property Relief (APR) and Business Property Relief (BPR) will be capped at a combined GBP 2.5 million per individual. Qualifying agricultural and business assets above that threshold will receive 50% relief, resulting in an effective 20% IHT rate. The allowance remains transferable between spouses and civil partners, allowing up to GBP 5 million of qualifying assets to benefit from full relief. In addition, Alternative Investment Market (AIM)-listed shares will no longer qualify for 100% Business Property Relief, instead receiving a flat 50% relief across their value.
Employment and workplace measures
Businesses will face higher employment costs as above-inflation increases to the National Minimum Wage take effect from April 2026. The working from home allowance, which allowed eligible employees to claim a weekly deduction for homeworking costs without receipts, will also be withdrawn.
Business rates
New rateable values for non-domestic properties in England and Wales will apply from 1 April 2026. Lower multipliers will apply to eligible retail, hospitality and leisure properties with rateable values below GBP 500,000, while properties valued above that threshold will be subject to a higher multiplier. Scotland will also introduce updated rateable values alongside reductions in the poundage rates and capped support for retail, hospitality and leisure businesses.
EMI share option expansion
The Enterprise Management Incentive (EMI) share option scheme has been expanded to include companies with up to 500 employees, up from 250, and gross assets of up to GBP 120 million, up from GBP 30 million. The changes also extend the maximum period for employees to hold unexercised share options from 10 years to 15 years, allowing more businesses to offer tax-advantaged share options to recruit and retain staff.
