At the start of the 2026/27 tax year, several important UK tax changes have come into effect. These developments will impact how individuals and businesses report income, plan for tax liabilities, and make financial decisions.
This month’s update outlines the key changes and the practical steps you should consider.

Making Tax Digital for Income Tax (MTD ITSA)

HMRC is progressing its Making Tax Digital initiative, fundamentally changing how income tax is reported. From 6 April 2026, self-employed individuals and landlords with qualifying income exceeding £50,000 will be required to:

• Maintain digital records
• Submit quarterly updates to HMRC
• Complete a final end-of-year declaration

Further thresholds will apply in later years.

Recommended actions:

• Move to MTD-compatible accounting software
• Ensure bookkeeping is kept up to date
• Plan for quarterly reporting cycles

Dividend Tax – Ongoing Planning Required

Dividend tax rates are increasing by 2% from April 2026, with the basic and higher rates rising to 10.75% and 35.75% respectively (additional rate remains at 39.35%).

At the same time, the dividend allowance remains at a reduced level of £500, meaning more dividend income will be subject to higher tax.

Recommended actions:

• Review your salary and dividend strategy
• Consider the overall tax position, not just headline rates
• Make use of available tax-efficient allowances where appropriate

Business Asset Disposal Relief (BADR)

From 6 April 2026, the Capital Gains Tax rate under BADR has increased to 18%.
This represents a notable rise compared to previous years and will affect business exit planning.

Recommended actions:

• Review any planned business sales
• Confirm eligibility for relief
• Seek advice well in advance of disposal

Inheritance Tax – Relief Cap Introduced

A cap has now been introduced on full Business and Agricultural Property Relief:

• 100% relief applies up to £2.5 million
• 50% relief applies thereafter

This may create inheritance tax liabilities for estates that were previously fully relieved.

Recommended actions:

• Review estate valuations
• Consider succession and gifting strategies
• Assess potential funding options for future liabilities

Electric Vehicles – New Tax Charges

Electric vehicles are now subject to Vehicle Excise Duty:

• First-year rate: £10
• Standard annual rate: £200
• Additional charges may apply for higher-value vehicles

Recommended actions:

• Reassess company car choices
• Review total cost of ownership
• Compare alternative vehicle options

National Insurance Contributions (NICs)

Changes for those overseas

Access to voluntary Class 2 NICs is now restricted, with many individuals needing to rely on higher Class 3 contributions.

This may affect entitlement to the UK State Pension.

Recommended actions:

• Review your National Insurance history
• Consider whether voluntary contributions are beneficial
• Take advice before making payments

How We Can Help
These changes mark a shift in compliance and long-term tax planning, and at CloudAcc we support clients with MTD readiness, tax-efficient profit extraction, succession planning, inheritance tax reviews, and ongoing personal and corporate tax advice.
If you need assistance, our team is here to help. You can get in touch with us to schedule a review or consultation.