Key UK Tax Changes for Individuals and Businesses in 2026: What You Need to Know

As we head into 2026, significant tax changes are set to affect UK individuals, sole traders, landlords, and companies. Some of these were announced in the Autumn Budget 2025 and through HMRC legislation, while others reflect ongoing Government reforms designed to modernise the tax system and rebalance business taxation.

Here’s a practical breakdown of the most important tax changes taking effect in 2026.

1. Making Tax Digital Moves Forward (April 2026)

A major change affecting many self-employed taxpayers and landlords is the roll-out of Making Tax Digital for Income Tax (MTD for ITSA).

From 6 April 2026, if you’re a sole trader or landlord with combined property and business income over £50,000, you must:

• Keep digital records of your income and expenses

• Use HMRC-approved software

• Submit quarterly digital updates to HMRC (instead of a single annual Self Assessment). This shift is designed to improve accuracy and make tax reporting more up to date, but it will require preparation if you’re used to annual returns only.

2. Capital Allowances Reforms Affecting Businesses

Changes to how businesses claim tax relief on plant and machinery are coming:

• New 40% First Year Allowance: From 1 January 2026, businesses can claim a 40% upfront allowance on qualifying assets that aren’t already covered by full expensing (particularly relevant for assets intended for leasing or non-corporate businesses).

• Reduction in Main Writing Down Allowance: From April 2026, the main rate for writing down allowances drops from 18% to 14%, meaning slower tax relief on qualifying assets not covered by first-year allowances.

This affects both limited companies (for Corporation Tax) and unincorporated entities (for Income Tax).

3. Business Rates Reform (April 2026)

Business rates liabilities in England will be updated:

• The standard multiplier (used to calculate rates liability) is reduced in 2026/27.

• Relief for small and retail/hospitality/leisure (RHL) properties is being boosted with lower multipliers targeted at smaller businesses.

• A new high-value multiplier applies to larger properties.

These reforms aim to support small businesses after several revaluations increased rate bills and to ease burdens on key high-street sectors.

4. Corporation Tax Filing Penalty Increases

From 1 April 2026, the penalties for late filing of Corporation Tax returns are set to double, making compliance more critical than ever. Directors and finance teams should ensure systems are in place to meet statutory deadlines.

5. Income Tax and Dividend Tax Adjustments

Although not all changes take effect in 2026, draft legislation points to shifts in tax rates for various income types that businesses and investors should be aware of:

• Dividend tax rates are scheduled to change from 6 April 2026 (details were set out in Budget documents).

• Other adjustments to savings and property income tax rates are planned for later, but the groundwork in legislation begins in 2026.

Stay alert for final HMRC guidance on these rate changes, as they can affect planning for remuneration and investment income.

6. Abolition of Non-Resident Dividend Tax Credit

From 6 April 2026, the notional dividend tax credit previously available to non-resident individuals on UK company dividends will be removed. This may impact international investors receiving UK dividend income and should be considered in cross-border tax planning.

7. Construction Industry Scheme (CIS) Fraud Powers

Legislation taking effect from 6 April 2026 strengthens HMRC’s powers under the CIS to tackle fraud. HMRC will be able to:

• Remove Gross Payment Status (GPS) immediately if a business is linked to tax fraud

• Assess tax lost and impose penalties up to 30% on those involved

• Simplify some filing obligations, such as reinstating nil filing for contractors. These changes aim to protect the integrity of the CIS and reduce non-compliance.

8. Other Tax and Levy Updates

Landfill Tax and Plastic Packaging Tax rates will rise in line with inflation (Retail Price Index) from 1 April 2026. This affects businesses in waste and packaging sectors.

Additionally, HMRC will gain new powers relating to MTD penalties and exemptions to support the consistency of digital reporting from April 2026 onwards.

What This Means for You

2026 will be a year of transition across multiple tax areas:

• Digital compliance becomes essential for many self-employed and property-income taxpayers.

• Businesses need to review their fixed-asset investment plans to maximise capital allowances under the new rules.

• Corporation tax and business rates changes demand careful planning in finance teams.

• International tax planning should consider the removal of non-resident dividend credits.

Preparing early, especially for MTD and capital allowances, will give you a head start and reduce last-minute stress.

If you’d like personalised guidance on how these tax changes will affect your business or personal tax planning in 2026, get in touch with Highway 61 today. We help UK individuals and companies stay compliant, efficient, and ahead of the curve.