Understanding the tax and policy changes coming into effect from April 2026

The start of a new tax year often brings several changes to tax policies and rates which impact small businesses, self-employed people, and employers. In this article we go through some of the key changes which will come into effect from April 2026. We also have an article which talks about what you can do to help your business prepare for a new financial or tax year.

Business rates

Business rates are usually charged on properties used for non-domestic purposes, such as shops, guest houses, and offices. The government sets a “multiplier value” which is multiplied by the property’s rateable value to work out what business rates it will pay. The points below explain what changes you might see to business rates from April 2026.

Rates relief for retail, hospitality and leisure properties

Retail, hospitality, and leisure (RHL) business properties based in England will be permanently reduced starting from 2026/27 (6th April 2026 – 5th April 2027), with the small business multiplier for RHL properties being 38.2p. The standard multiplier will be 43p.

Pubs and live music venues will be entitled to receive a further 15% reduction.

High-value business multiplier

New business rates are being introduced for properties with a rateable value of £500,000 and above, and will be set at 50.8p in 2026/27.
 

Capital allowances

Businesses can use capital allowances to claim a reduction on their tax bill against the expense of owning and maintaining assets over a long period of time. Things like vehicles, machinery, and equipment are often used as an example.

There are different types of capital allowances so the rules can vary but we’ll cover the main changes below.

Writing down allowances

These allow you to claim tax relief on an asset’s value for a longer period of time. The main rate will decrease from 18% to 14% from April 2026 (which means there won’t be as much tax relief available using this type of allowance).

40% First Year Allowance on main-rate assets

This is a new type of First Year Allowance and applies from 1st January 2026. It’s different to other types of FYAs because it includes unincorporated businesses (such as sole traders or partnerships) and can be applied to assets which you use for leasing.

100% FYA for zero-emission cars and chargepoints

Referred to as ‘Green First Year Allowances’, these allow you to claim up to 100% of the asset’s value in the same accounting period you buy it. They’ll be available for qualifying expenditure on zero-emissions cars, and on plant or machinery required for electric vehicle charge points until March 2027 for companies, and April 2027 for income tax purposes.

Capital Gains Tax (CGT)

Capital Gains Tax, or CGT for short, is charged on the ‘gain’ you make from disposing of assets. There are several changes coming up from April 2026 – particularly if you’re planning to sell your business.

Business Asset Disposal Relief (BADR)

Some businesses are able to claim Business Asset Disposal Relief to reduce the rate of Capital Gains Tax they must pay. Using BADR means you pay a lower rate of Capital Gains Tax rather than the usual rate – for some types of taxpayer anyway.

From 6th April 2026 the rate of Capital Gains Tax you need to pay if you’re using Business Asset Disposal Relief will increase from 14% to 18%, making it the same as the basic rate for CGT.

This means basic rate taxpayers won’t see the same benefit, but there will still be a discount for higher rate taxpayers (though not as much). This might affect the timing of any disposals you’re considering!

Employee Ownership Trusts

Employee Ownership Trusts allow a business owner to sell their shares to a trust set up for the benefit of employees working in that company. Doing this made shareholders 100% exempt from paying Capital Gains Tax on the disposal, but the amount of relief available is now 50%.

Incorporation relief claims process

Setting up a limited company and transferring personal assets into it can sometimes incur Capital Gains Tax. You can claim tax relief to cancel this out, but you’ll now need to actively apply for this, rather than it being an automatic process.

Company cars and vans

Using a company car or van for personal journeys is seen by HMRC as a taxable perk, which can affect the tax paid by individuals and the company providing the benefit. For the 2026/27 tax year:

• The flat-rate van benefit charge will increase from £4,020 to £4,170 for drivers who use company vans for personal trips
• The multiplier for the car fuel benefit will increase from £28,200 to £29,200
• The flat-rate van fuel benefit charge increases from £769 to £798

Corporation Tax

Corporation Tax isn’t changing, with the main tax rate to remain capped at 25% but marginal rate relief may help reduce this. The penalties for submitting a Corporation Tax Return past the deadline will double with effect from 1st April 2026.

Director’s loans – S455 Tax

Director’s loans owed to the company (that remain unpaid nine months and one day from the company’s accounting year-end) are subject to S455 Corporation Tax. It’s basically a way to make sure the unrepaid loan gets taxed if the director keeps it for personal income, so the rate is linked to the higher rate of dividend tax. When this increases in April 2026, the S455 tax rate will increase to 35.75% at the same time.

Dividend Tax

The rate of Dividend Tax charged on any dividends you receive above the £500 tax free allowance will increase from April 2026:

• Basic rate: Increasing from 8.75% to 10.75%
• Higher rate: Increasing from 33.75% to 35.75%
• Additional rate: Remaining at 39.35%

Employers (and directors who take a salary)

Employers will see several changes come into effect from April 2026, including Statutory Sick Pay rules, National Insurance, and minimum wage.

National Insurance changes affecting employers from April 2026

From 6th April 2026:

• Lower Earnings Limit: The LEL will increase from £6,500 to £6,708. These changes may affect the way directors pay themselves from their own limited company in order to remain tax efficient.
• Veterans Relief: The relief scheme allows employers to hire qualifying veterans without making National Insurance contributions on earnings up to the Veterans Upper Secondary Limit of £50,270 for the first year of employment. Originally planned to end 5th April 2026, it will now run until April 2028.

National Living Wage and National Minimum Wage changes from April 2026

Employers must pay employees aged 21 or older (who are not in the first year of an apprenticeship) the National Living Wage. Apprentices and workers aged 20 or younger are covered by different rules, called the National Minimum Wage (NMW). From April 2026 these rates are:

• Apprentices and under 18s: Increasing from £7.55 per hour to £8.00 per hour
• 18 to 20 year olds: Increasing from £10.00 per hour to £10.85
• National Living Wage: Goes from £12.21 per hour to a minimum of £12.71

Statutory Sick Pay entitlement

The 3-day waiting period before Statutory Sick Pay will be removed from 6th April 2026. It means employees will be able to start receiving SSP from day one. Other key changes include:

• The requirement to earn at least the Lower Earnings Limit in order to be eligible for SSP will also be removed
• The weekly rate increases to £123.25 or 80% of their average weekly earnings – whichever is lower

Working from home

Employees can currently claim tax relief for the associated costs of working from home if you don’t already reimburse them as an employer. This tax relief will be abolished from 6 April 2026.

National Insurance

National Insurance rates and thresholds will remain largely the same for employees and self-employed people, except:

• Employees: Lower Earnings Limit (LEL) increases from £6,500 to £6,708. Employees don’t pay National Insurance at this threshold, but earnings above it will earn NI ‘credits’ and accrue benefits such as the State Pension
• Self-employed: Small Profits Threshold (SPT) increases from £6,845 to £7,105. Self-employed people don’t need to make National Insurance contributions on earnings at this level, but earning above it entitles them to NI credits

Property tax

This change doesn’t come into force in England, Wales and Northern Ireland until April 2027 but it’s worth mentioning now so that you have time to prepare. A new tax rate for individuals (not limited companies) will see property income taxed more heavily than other forms of income:

• Basic rate: 22% (increasing from 20%)
• Higher rate: 42% (increasing from 40%)
• Additional rate: 47% (increasing from 45%)

Property income received by a limited company won’t be affected by these changes because it’s subject to Corporation Tax. You might find it worth chatting to your accountant about the most tax-efficient way for you to own your property.

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