INTRODUCTION
Here are six big changes we’re about to see from this month with the start of the new tax year.And if you’re soul trader or a landlord, one of these will completely change how you deal with HMRC.
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Let’s start off making tax digital for income tax.We are now seeing the start of the end of being able to just file one tax return to HMRC because from the 6th of April 2026-27, if you are a soul trader or a landlord and you’ve made more than £50,000 of qualifying income in the 2024-25 tax year,you will be required to submit quarterly updates to HMRC along with a final declaration at the end of tax year.So that’s essentially reporting to HMRC five time in one tax year.
Even if you’re not quite making £50,000 yet, the threshold decreasing. So that more and more soul trader and landlords are going to be caught by this requirement to make quarterly updates along with that final declaration. The qualifying income threshold will eventually decrease to £20,000.
And it’s going to be difficult for two reasons.
First of all, it’s an additional cost for people to get HMRC compliance software or to appoint an accountant to help them with this change.And secondly, it is an additional ongoing burden to keep making those quarterly updates to HMRC.
Once everything’s set up, it should be straightforward, but it’s just that initial period of making sure you’ve got the right software and that all of your records are digitalized that’s going to headache for so many people.
What change for Dividend Tax Rates ?
Next is the change to dividend tax rates. This is one way that personal taxes are set to increase from April this year because the dividend tax rates for basic and higher rate taxpayers are increasing.
This will impact individuals who own dividend paying shares outside of an ISA and where they exceed the 550 annual allowance. But it will also impact business owners who pay themselves a dividend as part of their remuneration package which most company owner do. So the basic rate is increasing from 8.75% to 10.75% and the higher rate is increasing from 33.75% to 35.75%.
The additional rate is staying the same and the 500 dividend allowance which you can earn tax-free every tax is also staying the same. Dividends are still often a very tax efficient way to pay yourself from your company, but this is stealthy tax rise that will impact business owner.
It will also impact some investors and it will impact landlords who own property through a corporate structure.
So remember that it’s important to max out your ISA allowance if you are investing in dividend paying stocks and to also review your remuneration package if you are a company owner who pays yourself a dividend so that you can understand and plan for your new tax liability.
How is Business Asset Disposal tax changing ?
So this will apply to entrepreneurs who have built up a business and then want to exit because it will impact how much tax is payable when they come on to sell their shares or when they make a qualifying disposal of business assets.
So, the usual rate of the capital gain tax is 18% or 24% but business assets disposal relief reduced that tax rate for qualifying disposals to 10%. It has since gone up to 14%, but it’s going up to 18%.So, let’s say that you made a gain £50,000 on the sales of your shares and it qualified for business assets disposal relief.
At one time that would have resulted in a bill £50,000, but it would now result in a tax bill of £90,000 purely, because the tax rate has slowly been increasing over the year from 10% to 18%.
So if you’re an entrepreneur and you’re planning to sell your shares, this will impact the amount of tax that you pay when you come on to sell your shares or any assets in the business.
It will also impact the investor because investors relief is changing in the same way and it’s also increasing to 18%. So, that’s when you might buy shares in a company but you’re not an officer or an employee and then you want to exit your shareholding.
INHERITANCE TAX RELIEF
We’ve got two really powerful inheritance tax reliefs in England when it comes to passing on property. And those are business relief and agriculture relief.
And those allow you to pass on your business, agriculture property or a farming business completely free of inheritance tax. But that is now changing.
So, at one time up until now, you could have passed on your business even if it was multi-million pound business and no inheritance tax will be payable when all of the conditions were met.
But there will now be a cap so that the first 2.5 million is free of inheritance tax and attracts the 100% relief if it qualifies for business relief or agricultural property relief.
But that’s now changing so that after that 2.5 million pound, the rest of the business only attracts relief at 50%. So, that means that if a farming business or a family business is being passed on to the next generation and it’s valuable enough, so it exceeds the 2.5 million pound value, an inheritance tax bill could be payable by the family inheritance the business.
And we could end up in the situations where there are families who assestri but not necessarily casher and they may not be able to pay the inheritance tax liability meaning that they may have to sell off the business or parts of the business just to be able to pay the tax.
UK CAR TAX VED
Vehicle excise duty is a road tax that you must pay to be able to drive your car on public roads.
New electric vehicles that were registered from the 1st of April 2025 Have been able to pay a vehicle excise duty charge of 10 a year.But from April 2026, That’s now increasing to 200 a year, bringing it more in the line with slightly older electric vehicle.
That means that the negligible charge of 10 a year no longer applies.Plus, remember the car supplement, too. So, some electric drivers will be paying as much as 640 a year in a road tax.
VOLUNTARY PAYMENT OF CLASS 2 NICs
Next up is changes to voluntary national insurance payments. To access the full state pension, you need to have 35 qualifying years, which means 35 years where you are paying national insurance or receiving credits.
When people move abroad, they are still able to make voluntary contribution if they want to move back to the UK at some point and receive the full state pension.
Currently, some people living abroad are voluntarily paying class 2 national insurance payments to be able to build up their qualifying years to make sure that they do access the state pension if they move back to the UK.
There are certain conditions that have to be met to be able to voluntarily pay class 2.
One of them is that you were self employed before you left the UK.But the government is now restricting who can voluntarily pay class 2 whilst living abroad.
And currently it’s fairly cheap at 180 a year.But now the government is saying that those people will need to pay class 3. national insurance payments, which are significantly more expensive at round £800 to £1,000 year.
