A new tax year often feels like a fresh start, but 2026/27 is less about dramatic change and more about frozen thresholds, small tweaks, gradual reforms and increased compliance. Together, these shifts underline one clear message: effective tax planning has never been more important.
Below are some of the key points for the year ahead — and what you should be considering now!
1. Many Allowances Remain Frozen
Several key allowances are still frozen, including the personal allowance, higher‑rate tax threshold and the VAT registration threshold.
When allowances are frozen and wages and prices rise, more people are gradually pulled into paying higher rates of tax. This is often referred to as “fiscal drag”, and it’s one of the reasons people feel they’re paying more tax even if their circumstances haven’t changed.
What you can do:
Early planning helps. Reviewing how income is taken, how profits are shared, or whether pension contributions are being used efficiently can make a real difference.
2. Making Tax Digital for Income Tax: Now Live
MTD for Income Tax has finally launched, and the first MTD return will be due before 7 August 2026. You must comply if total gross income (turnover before expenditure) from self‑employment and/or property is:
- Over £50,000 from 6 April 2026
- Over £30,000 from 6 April 2027
- Over £20,000 from 6 April 2028
What you can do:
Get advice before it becomes urgent. MTD isn’t just about software it affects how often you report to HMRC, the time you spend on admin, and penalties if deadlines are missed.
3. Corporation Tax Stays Higher: Planning Is Key
The 25% main corporation tax rate remains, with marginal relief applying to profits between specified lower and upper thresholds. Planning is increasingly important for limited company directors. Decisions around the timing of income/expenditure and pension contributions can all have a significant impact on the final tax bill.
What you can do:
Don’t wait until year‑end. Reviewing during the accounting year allows more planning options and fewer surprises.
4. Dividend Tax: Low Allowance, Higher Rates
The dividend allowance remains low, and dividend tax rates have increased by two percentage points for basic and higher‑rate taxpayers. There is also increased disclosure on personal tax returns for dividends received from smaller owner-managed companies, with penalties for incorrect reporting.
What you can do:
A regular review of salary, dividends and pension contributions can ensure you’re still extracting profits tax‑efficiently.
5. Increased HMRC Compliance Activity
HMRC’s use of data and automation continues to grow, leading to:
- More compliance checks
- More “nudge letters”
- Greater use of penalty point systems
What you can do:
Good records, timely submissions and early advice are still the best defence.
The 2026/27 tax year reinforces a familiar message: tax planning is essential. Frozen thresholds, higher corporation tax rates and increased enforcement mean proactive planning matters more than ever.
If you’d like help understanding how these changes affect you or your business, early advice can help you stay compliant, reduce tax and plan with confidence.
Contact UsAuthor: Kerry Stabler | Practice Manager
