When a new calendar year rolls around, we usually feel ready for change and transformation — but the same can’t always be said for a new tax year.
With the 2026/27 tax year underway, it’s important to make sure you’re aware of any financial updates that might impact you.
Many of these were outlined (and have since come into effect) by the UK government in the 2025 Autumn budget, including frozen tax thresholds, salary sacrifice pension contributions, and income tax thresholds.
In this blog, we’ll cover the following changes that might affect your investments, pensions, and savings:
- Frozen tax thresholds
- Dividend tax changes
- State Pension changes
- Capital gains tax changes
- Inheritance tax changes
- Scottish income tax bands
- Student loan repayment thresholds
- National minimum wage increase
- Making Tax Digital
- Other changes
- Conclusion
Frozen tax thresholds
One of the most significant Autumn Budget announcements was the extension of tax threshold freezes.
The existing freeze for basic, higher, and additional rate taxpayers was originally set to last until 2028/29; this will now continue until April 2031.
If you’re a basic rate taxpayer living in England, Wales, or Northern Ireland*, this could mean you reach the higher income tax threshold sooner if you receive pay rises between now and 2029/30. The same applies to higher rate taxpayers, who might move into the additional rate threshold by then, respectively.
This process is known as fiscal drag, and refers to inflation or pay rises pushing people into higher tax brackets; the government collects more tax, even though people’s real buying power hasn’t increased.
*Scottish residents have separate income tax bands.
Dividend tax changes
Effective from April 2026 for the new tax year is a 2% increase to the tax rate on income earned from dividends (the money a company pays to you from the profits it makes).
This change has seen basic rates of tax on dividends increase from 8.75% to 10.75%, and higher rates jump from 33.75% to 35.75%.
This is particularly important if you’re investing in a General Investment Account, as you have to pay tax on your dividends. Likewise, it’s why sheltering your investments using tax-free accounts – like a Stocks & Shares ISA or Personal Pension – could matter even more now.
State Pension changes
As of April 2026, the full State Pension received a 4.8% increase under the triple lock, jumping from £230.05 a week to £241.30; the basic State Pension rose from £176.45 to £184.90 per week.
As a result, the new full State Pension sits at approximately £12,548, a figure which:
- Sits just below the Personal Allowance of £12,570 (the amount you can earn without having to pay any tax).
- Still falls short of the Retirement Living Standards’ “minimum” of £13,400 a year. [1]
Remember, qualifying for the State Pension – and the amount you receive – is based on the number of years you have contributed to National Insurance. This is why it’s important to plan for your retirement, so you can embrace the lifestyle that works for you after leaving the world of work.
Due to compound growth, you could get the most out of your pension by contributing to your pension pot as early on in your career as possible.
Of course, if your retirement is drawing closer, you can also increase the amount you contribute each month. Or, if you haven’t already, open a Personal Pension alongside your workplace pensions to boost your savings.
If you’re not sure about what type of pension is best for you, check out our blog on the difference between the State Pension and a personal pension.
Capital gains tax changes
Capital Gains Tax (CGT) refers to the tax applied to the profit you make through selling (sometimes known as ‘disposing of’) an asset that has increased in value. This tax applies exclusively to the gains made, and certain assets are tax-free.
And, although CGT rates have remained unchanged for the 2026/27 tax year, it’s worth remembering that they currently stand at:
- 18% for basic rate taxpayers (applicable to non-residential property and carried interest).
- 24% for higher rate taxpayers (applicable to non-residential property and carried interest).
- 24% for trustees & Personal Representatives (applicable to disposals on or after 30 October 2024).
- 18% for Business Asset Disposal Relief (BADR).
Remember, you don’t have to pay CGT if the total amount of your gains is under the tax-free allowance for this financial year (plus, you don’t even have to pay any tax on gains made from an ISA).
Inheritance tax changes
Just to recap, anything you leave in your will above £325,000 could be taxed at a rate of 40% (anything below is known as the nil-rate band). This limit goes up to £500,000 if you pass on your home to your children or grandchildren, and up to £1 million if you leave everything to a spouse or civil partner.
These tax-free limits are frozen until April 2031, so as prices rise, more people could end up paying.
From April 2027, any unused pension savings will also count towards your estate; so, it’s worth thinking ahead about the best way to leave an inheritance.[2]
New for the 2026/27 tax year is Business Relief and Agricultural Relief being capped at £2.5m.
Family business owners and farmers can no longer automatically qualify for unlimited inheritance tax relief. Instead, there is a £2.5m cap on how much they can pass on tax-free; any qualifying assets above that limit may face an effective inheritance tax charge of 20%.
Scottish income tax bands
If you’re a Scottish taxpayer, the following tax band changes came into play for the 2026/27 tax year:
- The basic rate threshold increased from £15,398 to £16,538.
- The intermediate rate threshold increased from £27,492 to £29,527.
As a result, current tax band breakdowns are as follows:
Remember, money put into your pension is exempt from income and capital gains tax.
When it comes to withdrawing from your pension (it remains unavailable until the age of 55, rising to 57 in April 2028), you’ll typically be allowed to take 25% tax-free.
If you’re looking to learn more about how you can receive your pension, check out our blog on taking a lump sum from your pension.
Student loan repayment thresholds
The “repayment threshold” refers to the point at which borrowers need to start repaying their student loan, and what amount.
For the 2025/26 tax year, the first Plan 5 borrowers became eligible to start making repayments. Likewise, for “Plan 2” students, loans will be frozen at £29,385 from April 2027 until March 2030.
As a result of these changes, repayment thresholds currently stand as follows:
If you have a student loan (and depending on your plan and salary), these changes could mean lower repayments, or no repayment obligations at all if your earnings are below the new thresholds.
If you’re unsure of what this might mean for your take-home pay, make sure to check your most recent payslip, so you can then budget accordingly.
National minimum wage increase
There have been National Minimum Wage (NMW) increases for the tax year 2026/27. You can see the new minimum rates – including National Living Wage – broken down below:
These changes form part of the government’s plan to boost the local economy and narrow the age-based wage gap. For individuals on minimum wage, this increase in earnings could mean the chance to put away additional money for the future.
Making Tax Digital
New for the 2026/27 tax year is the government’s Making Tax Digital initiative.
Launched to move income tax recordkeeping and reporting online, it asks eligible self-employed people and landlords to keep digital records and send regular updates to HMRC using compatible software.
If you’re a sole trader or landlord earning over £50,000, you now have to:
- Send quarterly digital tax submissions to HMRC.
- Make an end-of-year declaration.
- From April 2027, the above will apply to those earning over £30,000, not £50,000.
Other changes
Statutory pay
For the 2026/27 tax year, Statutory Sick Pay is up to £123.25 per week for eligible employees, with Statutory Maternity Pay up to £192.32 per week.
Home working allowance
As of April 2026, employees can no longer claim the £6-a-week flat-rate relief directly from HMRC.
However, there are no new changes for the main rate of Employer National Insurance (which remains at 15%) or Stamp Duty.
Conclusion
To make sure you’re putting your best financial foot forward for the 2026/27 tax year, it’s good to be aware of the above changes and, most importantly, how they might affect you.
For most of us, take-home pay is what really matters; working this out gives you the best chance of budgeting effectively to maximise your financial potential.
You could also consider ways to make your money go further, with options such as tax wrappers like Cash or Stocks and Shares ISAs, and pensions to reduce your tax liabilities.
Remember, Wealthify does not provide financial advice. If you’re feeling lost or overwhelmed, you should seek advice from a professional financial advisor who can help with guidance on managing money and/or investments.
You can also find more general tips and info on how to get ahead in the new tax year over on our blog.
Investing gives your money the opportunity to grow over the long term, although returns can rise and fall with market conditions.
Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.
Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.
References
