Key Takeaways
- Adult savers and investors get a new £20,000 ISA allowance from April 6.
- For those relying on income outside of ISAs, dividend tax increases for most taxpayers.
- Tax allowances are frozen for payrolled employees, while the Making Tax Digital scheme marks a radical change for self-employed workers.
The new tax year starts on April 6, 2026, resetting savings and investing allowances and bringing changes to state pensions, tax rates and benefits.
From April 2026, adult savers will have a new £20,000 allowance, and those putting money into junior ISAs will have the usual £9,000 allowance. The lifetime ISA allowance will reset at £4,000, but this is part of the £20,000 allowance for adults.
But these allowances are set to change in the next tax year, which starts on April 6, 2027, with a decrease in the cash ISA allowance from £20,000 to £12,000 for those under 65. The move is designed to encourage equity investing and long-term pension planning, and disincentivize lower-return cash savings.
For now, it’s business as usual, although some ISA providers are reporting a spike in flows into cash accounts already, and expect a surge in cash saving for the final financial year the £20,000 allowance is in place.
Changes to Dividend Tax in April 2026
Ahead of the ISA changes in 2027, dividend investors will pay higher tax rates on income, although the tax-free dividend allowance remains the same at £500.
From April 2027, the basic rate of tax on dividends will increase from 8.75% to 10.75%, while the higher rate of tax on dividends will rise from 33.75% to 35.75%. Additional-rate taxpayers, those earning £125,140 or more, pay 39.35% on their dividends outside an ISA, unchanged from the year before.
What About UK Savings Tax?
The most significant changes to savings outside the ISA regime are occurring in 2027. In tandem with reduced cash ISA allowances, the savings interest accrued outside of this system will be subject to higher tax rates.
Basic-rate taxpayers still have an allowance of up to £1,000 before they pay tax, but from the 2027/2028 tax year, the basic rate of savings will be increased by two percentage points to 22%, while the higher rate will be increased by two percentage points to 42%. The savings additional rate will be increased by two percentage points to 47%.
Will I Have to File a Self-Assessment Tax Return in 2026?
For employed workers, the new tax year means no changes to personal allowances, which are frozen until April 2031. There is no tax to pay on earnings up to £12,570, which is known as the personal allowance.
Despite speculation ahead of the Autumn Budget of an increase, the income tax rates were left at 20%, 40% and 45%.
Many self-employed workers and their accountants have previously focused on the self-assessment deadline of Jan. 31. This is the annual deadline for filing accounts for the previous tax year. HMRC then calculates tax liabilities.
But a change is coming this year as the government introduces the Making Tax Digital system from April 2026. This involves mandatory quarterly reporting of income and expenses. Still, the Jan. 31 deadline will remain circled on calendars for 2027: this is the date for a “final declaration” of an individual’s tax affairs.
Among those affected are sole traders and landlords if they earn more than £50,000 from their activities.
What Other Personal Finance Changes Will Take Place in April 2026?
Several other changes will take place to taxation and spending from April.
- The UK state pension will rise by 4.8% in April 2026, as confirmed by the chancellor, Rachel Reeves, in the budget.
- The National Living Wage will rise to £12.71 per hour for those aged 21 and over.
- The two-child benefit cap will be lifted.
- Some benefits will be uprated in line with inflation, while Universal Credit is increased by 6%.
- Many mobile phone, TV, and broadband contracts renew in April.
- Long-term asset funds or LTAFs will become eligible to be held in Stocks & Shares ISAs in April 2026.
- Venture capital trust (VCT) income tax relief will fall to 20% from 30%, which will come into effect from April this year.
- The employers’ national insurance contribution (NIC) threshold will be frozen at £5,000, and the NIC upper earnings limit will be frozen at £50,270 until 2031.
- NHS prescription charges frozen.
- Corporation tax late filing penalties will double.
- The main capital gains tax rates stay at 18% and 24% for basic and higher/additional rate taxpayers.
- The CGT annual tax-exempt amount resets at £3,000.
- The CGT rate on disposals under the Business Asset Disposal Relief will increase to 18% from 14%.
- Remote gaming duty will increase to 40% from 21%.
- Inheritance tax business property relief will be restricted to 50% for shares listed on recognized stock exchanges such as the Alternative Investment Market or AIM.
- IHT nil-rate bands, including the combined allowance for the 100% rate of agricultural property relief and business property relief of £1 million, will now stay fixed for an additional year, ending April 2031.
