10 Major HMRC Tax Changes for UK Households Starting April 6, 2026
The new tax year beginning on April 6, 2026, introduces a comprehensive set of tax adjustments and policy updates that UK households must navigate. HMRC, under the Labour Party government, is implementing these changes across various areas including business rates, inheritance tax relief, and tax return procedures.
Key Changes to Inheritance Tax Relief
From April 6, 2026, the 100% rate of Agricultural Property Relief (APR) and Business Property Relief (BPR) will be capped at the first £2.5 million of combined agricultural and business property. Assets exceeding this limit will receive relief at 50%. This £2.5 million allowance is index-linked to the Consumer Prices Index (CPI) starting April 6, 2031.
Unused portions of the allowance can be transferred between spouses and civil partners, allowing couples to benefit from a combined allowance of up to £5 million. The allowance refreshes every seven years. Additionally, shares not listed on a recognised stock exchange, such as those on the Alternative Investment Market (AIM), will qualify for 50% BPR instead of the current 100%, without affecting the £2.5 million allowance.
Increased Business Asset Disposal Relief
Business Asset Disposal Relief (BADR), which reduces the effective Capital Gains Tax (CGT) rate, is set to increase from 14% to 18% for assets disposed of on or after April 6, 2026. The lifetime limit for BADR remains unchanged at £1 million.
Making Tax Digital for Income Tax
Sole traders and landlords with an annual income over £50,000 will be required to maintain digital records and submit tax updates quarterly from April 2026. This process, known as Making Tax Digital (MTD), necessitates the use of compatible software to store information on income, expenses, VAT (if applicable), and tax adjustments.
Dividend Tax Rate Hikes
Dividend tax rates are increasing by 2% from April 2026. The basic rate will rise from 8.75% to 10.75%, and higher rates will increase from 33.75% to 35.75%. With the tax-free dividend allowance remaining at £500, director-shareholders may need to review their profit extraction strategies.
Inheritance Tax on AIM-Listed Shares
Shares listed on the Alternative Investment Market (AIM) will no longer qualify for 100% BPR relief. Instead, they will be subject to a flat 50% relief rate across their entire value, resulting in a permanent 20% Inheritance Tax liability on death for these holdings.
Employee Costs and National Minimum Wage
Above-inflation increases to National Minimum Wage rates will apply from April. The hourly rate for over-21s will rise by 50p to £12.71, workers aged 18-20 will see an 85p rise to £10.85, and under-18s and apprentices will get 45p more to £8 an hour. Chancellor Rachel Reeves stated that 2.7 million people will benefit from these increases, though businesses have warned of potential hiring freezes.
Business Incorporation Changes
From April 2026, businesses converting to a corporate structure will no longer automatically qualify for incorporation relief to exempt Capital Gains Tax charges associated with incorporation, even if conditions are met.
Working from Home Allowance
Individuals working from home will no longer be able to claim tax relief from HMRC for extra household costs, such as gas and electricity, from April 2026. The current flat rate allowance of £6 per week is only claimable if there is no office to go to, not for those choosing to work remotely.
Business Rates for Retail and Hospitality
As announced in the Autumn Budget 2024, retail, hospitality, and leisure relief will be replaced with two lower business rates multipliers for properties with rateable values below £500,000 from April 2026. The government has introduced five new multipliers:
- Small business retail hospitality and leisure (RHL) multiplier: For businesses with a rateable value below £51,000 (38.2p).
- Standard business RHL multiplier: For businesses with a rateable value between £51,000 and £499,999 (43.0p).
- Small business non-RHL multiplier: For businesses with a rateable value below £51,000 (43.2p).
- Standard business non-RHL multiplier: For businesses with a rateable value between £51,000 and £499,999 (48.0p).
- Large business multiplier: For businesses with a rateable value of £500,000 and above (50.8p).
EMI Share Option Scheme Expansion
The EMI share option scheme has been expanded to include companies with up to 500 employees (increased from 250) and gross assets of up to £120 million (up from £30 million), allowing more businesses to offer tax-advantaged share options.
These changes mark a significant shift in the UK tax landscape, requiring households and businesses to stay informed and adapt their financial planning accordingly.
