Essential UK Tax & Compliance Briefing: April 2026
Welcome to the April 2026 Edition
April marks the start of the 2026/27 tax year, and several significant legislative changes now take effect. These adjustments increase compliance requirements, affect business costs, and introduce higher tax rates for investment and business income.
Making Tax Digital (MTD) for Income Tax – Now Live
From 6 April 2026, MTD for Income Tax Self‑Assessment now applies to anyone who is self‑employed or receiving rental income with combined qualifying income exceeding £50,000.
You must now:
- Keep digital records of income and allowable expenses.
- Submit quarterly reports through MTD‑compatible software.
- File one final end‑of‑year submission.
HMRC has confirmed a "soft landing" for the first year; no late submission penalty points will be issued for the first four quarterly updates, though the requirement to keep digital records remains legally binding from day one.
From April 2027, the regime expands to include those earning above £30,000.
Dividend Tax Rate Increases – Effective 6 April 2026
Dividend taxes have increased by 2 percentage points for basic‑rate and higher‑rate taxpayers. The new rates are:
- Basic‑rate dividend tax is now 10.75% instead of 8.75%.
- Higher‑rate dividend tax is now 35.75% instead of 33.75%.
- Additional‑rate dividend tax remains unchanged at 39.35%.
With the dividend allowance remaining frozen at £500, many more individuals will now incur dividend tax.
Business Asset Disposal Relief (BADR) – Increased Tax Cost
From 6 April 2026, the Capital Gains Tax rate for BADR increases from 14% to 18%.
This affects business owners selling:
- All or part of their business;
- Shares in a personal company;
- Qualifying business assets.
Capital Allowances – Slower Tax Relief
From April 2026, the writing‑down allowance on plant and machinery reduces from 18% to 14% for companies (1 April) and for unincorporated businesses (6 April).
This means tax relief will now be spread over a longer period.
A new 40% First‑Year Allowance is being introduced for some qualifying expenditure, offering an opportunity for strategic investment planning.
Inheritance Tax Relief Reforms – New £2.5m Cap
From 6 April 2026, both Business Relief (BR) and Agricultural Relief (AR) are capped:
- The first £2.5 million of qualifying assets still receive 100% relief.
- Any value above that receives 50% relief.
This is particularly important for farmers, family business owners, and succession planners.
End of Homeworking Tax Relief
HMRC has abolished the flat‑rate homeworking tax relief from 6 April 2026. Employees must now provide proper evidence of costs to claim any deductions, or employers must reimburse them directly.
This may require updates to employer reimbursement policies.
Corporation Tax – Higher Penalties & End of Free Filing
From April 2026, penalties for late Corporation Tax returns increase significantly:
- The initial late filing penalty rises from £100 to £200.
- Returns over three months late will incur a £400 penalty.
- Repeated late submissions can escalate penalties up to £2,000.
In addition, HMRC’s free Corporation Tax filing service has been withdrawn, meaning all companies must now use commercial filing software.
National Living Wage – April 2026 Rates
Employers must update payroll for the following new minimum wage rates:
- Workers aged 21 and over: £12.71 per hour.
- Workers aged 18 to 20: £10.85 per hour.
- Workers under 18 or apprentices: £8.00 per hour.
These figures reflect statutory requirements from April 2026.
Rising Vehicle and Business Costs
From April 2026:
- Standard Vehicle Excise Duty rises to £200 per year.
- Vehicles with a list price above £40,000 attract an additional £640 annual supplement.
Business rates also undergo restructuring, including new property revaluations that may increase liabilities for larger premises.
What Individuals Should Do Now
- Review investment income in light of higher dividend taxes.
- Maximise ISA use to shelter future dividend income.
- Ensure you are using software that complies with MTD rules.
- Budget for tax increases linked to frozen thresholds (fiscal drag).
What Small Businesses Should Do Now
- Migrate fully to MTD‑compatible bookkeeping systems.
- Update payroll for National Living Wage increases.
- Reassess tax‑efficient profit extraction (salary vs dividends).
- Review timing of asset purchases due to reduced capital allowances.
- Ensure Corporation Tax returns are submitted on time to avoid higher penalties.
- Ensure you are using software that complies with MTD rules.
- Budget for tax increases linked to frozen thresholds (fiscal drag).
Essential Compliance Dates: April 2026
1 April Corporation Tax Payment: Deadline for companies with 30 June 2025 year-ends.
1 April National Living Wage: New rates take effect today (e.g., £12.71 for age 21+).
5 April Tax Year End: Final day of the 2025/26 tax year. Absolute deadline for ISA and pension allowance usage.
6 April New Tax Year Begins: MTD for ITSA becomes mandatory for income over £50,000. New Dividend and BADR rates apply.
14 April CT61 Submission: Deadline for return and payment for the quarter ending 31 March 2026.
19 April CIS & PAYE (Postal): Postal PAYE/NIC payments and CIS300 returns due for the period ending 5 April.
22 April PAYE & CIS (Electronic): Electronic PAYE, NIC, and CIS payments due.
30 April ATED: Deadline for Annual Tax on Enveloped Dwellings returns and payments for the 2026/27 period.
Visit the CrossCountry Website: www.crosscountry-accountants.co.uk
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