The new tax year – What is changing and what is staying the same?

As the start of the new tax year is imminent, it is time to understand what new tax obligations are in store for the coming months.

While a change to taxes is something that can be eye-catching, especially as much of it has been anticipated since the Autumn Budget, it is equally vital to understand what is staying the same.

Static thresholds can alter your obligations as much as changing tax rates, so we take a look at both to ensure you are ready for the new tax year.

What taxes are changing in 2026?

A decade after being first announced, Making Tax Digital (MTD) for Income Tax is finally happening.

Heralded as the biggest overhaul to tax in decades, MTD for Income Tax will see sole traders, landlords and self-employed individuals with incomes over £50,000 subject to new obligations.

Chief among these are the requirement for digital record-keeping and the need to submit quarterly filings alongside annual statements.

MTD for Income Tax will expand in scope over the next few years, pulling in people with lower incomes and penalties for missing deadlines will be enforced from 2027.

Inheritance Tax (IHT), while subject to less dramatic changes than MTD, will also be changing this year.

The previously generous 100 per cent relief for Agricultural Property Relief (APR) and Business Property Relief (BPR) will be capped at £2.5 million, with anything above that being subject to just 50 per cent relief.

If you are a business owner looking to dispose of assets in order to better manage your estate, then this will also be less tax-efficient than before.

Business Asset Disposal Relief (BADR) is increasing to 18 per cent, resulting in a higher Capital Gains Tax (CGT) bill.

What taxes are staying the same in 2026?

Income Tax is rapidly becoming the poster child of unchanging tax thresholds.

Since a slight tweak to the Additional Rate threshold in 2023, Income Tax thresholds have been unchanged and will likely not change until at least 2031.

This is despite April 2026 seeing another sharp increase in the National Minimum Wage (NMW) and the National Living Wage (NLW), which could potentially drive up wages across the board.

Given that the Personal Allowance threshold is not changing, this tax year will be the first where a full-time worker earning the NLW will see over half of their income exposed to Income Tax.

The exposure has sparked concerns about static thresholds, a debate that is perfectly captured by the ongoing debate around student loans.

Just as a full-time NLW is creating more Income Tax exposure, it is also now sufficient to trigger repayments for two of the four student loan plans.

This is seen as questionable given that the student loans were sold under the promise of payments being triggered by graduate salaries rather than the legal minimum for a full-time worker above the age of 21.

Fiscal drag is responsible for these ongoing concerns and could be harming the economy more than is initially apparent.

If lower-income workers find themselves exposed to too much Income Tax, or if graduates feel there is little point in seeking full-time employment, then there may be staffing issues in the near future.

Additionally, placing economic burdens on lower earners can further reduce their spending power, harming businesses generally but particularly those that focus on non-essential goods and services.

How can I prepare for the new tax year?

The current economic situation is becoming increasingly complex, with global uncertainty adding fuel to the fire.

Our team are on hand to help you understand your tax obligations so that you can mitigate unnecessary exposure and strengthen your financial position.