What are the main tax changes for 2026/27?

The headline changes for 2026/27 are: dividend tax rates increased by 2 percentage points (basic rate now 10.75%, higher rate 35.75%), employer National Insurance rose from 13.8% to 15% with the secondary threshold dropping to £5,000, and the two-child benefit cap on Universal Credit was removed. Income Tax thresholds remain frozen at 2022/23 levels.

Have Income Tax thresholds changed for 2026/27?

No. The Personal Allowance remains at £12,570, the basic rate band runs to £50,270, and the higher rate threshold stays at £50,270 for England, Wales and Northern Ireland. These thresholds have been frozen since 2021/22 and are not expected to rise until at least 2028/29. Fiscal drag continues to pull more earners into higher tax bands as wages grow.

How much have dividend tax rates gone up?

From April 2026, the basic rate on dividends rose from 8.75% to 10.75%, and the higher rate from 33.75% to 35.75%. The additional rate remains at 39.35%. The £500 dividend allowance is unchanged. A basic rate taxpayer now pays £107.50 tax per £1,000 of taxable dividends, up from £87.50 — a 23% increase in their dividend tax bill.

How does the employer NI increase affect me?

Employer NI rose from 13.8% to 15%, and the threshold dropped from £9,100 to £5,000. While employees don't pay this directly, it increases the total cost of employment. Businesses may respond with slower pay rises, reduced hiring, or restructured benefits. Self-employed individuals and company directors should also factor this into salary vs dividend decisions.

What is the two-child benefit cap and has it been removed?

The two-child limit previously restricted Universal Credit's child element to the first two children born after 6 April 2017. From April 2026, this cap has been scrapped entirely. Families can now claim the child element (£287.92/month per child) for all qualifying children. If you have three or more children, you may be entitled to significantly more Universal Credit than before.

Has the HICBC threshold changed for 2026/27?

The High Income Child Benefit Charge thresholds remain at £60,000–£80,000 for 2026/27, unchanged from 2024/25. The charge starts at 1% of Child Benefit for every £200 earned above £60,000, reaching 100% at £80,000. Pension contributions remain the most effective way to reduce your adjusted net income below the threshold.

What's the best salary for a company director in 2026/27?

The optimal director salary depends on your circumstances, but the lower employer NI threshold (now £5,000) means taking salary up to £12,570 now costs more in employer NI than before. Combined with higher dividend tax rates, the gap between salary and dividends has narrowed. Use our Salary vs Dividends Calculator to model the most tax-efficient split for your situation.

Is Class 2 National Insurance still payable?

Yes. Despite earlier plans to abolish it, Class 2 NI remains at £3.65 per week for self-employed earners above the small profits threshold (£7,105). Paying Class 2 NI protects your entitlement to the State Pension and certain benefits. Class 4 NI is charged at 6% on profits between £12,570 and £50,270, and 2% above that.

Have Capital Gains Tax rates or allowances changed?

The CGT annual exempt amount remains at £3,000 for 2026/27. Rates for 2026/27 are 18% (basic rate taxpayers) and 24% (higher/additional rate taxpayers) on all assets. There is no longer a distinction between residential property and other assets — the rates were unified in October 2024. The allowance has been significantly reduced from £12,300 in 2022/23, so more disposals now trigger a tax liability.

What are the Scottish Income Tax rates for 2026/27?

Scotland has its own income tax bands: Starter rate (19%) on income from £12,571 to £16,537, Basic rate (20%) to £29,526, Intermediate (21%) to £43,663, Higher (42%) to £75,000, Advanced (45%) to £125,140, and Top rate (48%) above £125,140. Scottish taxpayers should use a calculator that accounts for these specific bands.

Content reviewed 6 Apr 2026 · 2026/27 tax year

Tax Guide · Updated April 2026

UK Tax Changes for 2026/27: What's New This Tax Year

The 2026/27 tax year brought some of the most significant changes in years — from higher dividend taxes to the removal of the two-child benefit cap. Here's everything that changed and what it means for your finances.

Changes at a glance

What changed	2025/26	2026/27
Dividend tax (basic rate)	8.75%	10.75%
Dividend tax (higher rate)	33.75%	35.75%
Employer NI rate	13.8%	15%
Employer NI threshold	£9,100	£5,000
UC two-child limit	In effect	Removed
Personal Allowance	£12,570	£12,570 (frozen)
Higher rate threshold	£50,270	£50,270 (frozen)
Dividend allowance	£500	£500 (unchanged)
CGT annual exempt amount	£3,000	£3,000 (unchanged)

Dividend tax rates increased

From April 2026, dividend tax rates rose by 2 percentage points across the basic and higher rate bands. The basic rate increased from 8.75% to 10.75%, and the higher rate from 33.75% to 35.75%. The additional rate remains at 39.35%, and the £500 tax-free dividend allowance is unchanged.

In practical terms, a basic rate taxpayer receiving £10,000 in dividends will now pay £1,021.25 in dividend tax (after the £500 allowance), compared to £831.25 previously — an extra £190 per year. For higher rate taxpayers, the increase is even steeper.

This change is particularly relevant for limited company directors who extract profits through dividends. The narrowing gap between dividend tax and income tax rates means the traditional salary-plus-dividends model is slightly less advantageous than before, though it remains more tax-efficient than salary alone.

Dividend Tax Calculator Salary vs Dividends Calculator

Employer National Insurance rose to 15%

Employer NI increased from 13.8% to 15%, and the secondary threshold — the point at which employers start paying NI — dropped from £9,100 to £5,000. This is a significant increase in the cost of employment.

For an employee earning £35,000, their employer's NI bill rises from approximately £3,574 to £4,500 per year — an increase of over £900. While employees don't see this directly on their payslip, it affects hiring decisions, pay rises, and how businesses structure compensation.

Company directors face a double impact: higher employer NI on any salary they take, combined with higher dividend tax on the alternative. The optimal salary level for director-shareholders may have shifted — it's worth modelling different scenarios using the calculators below.

NI Calculator Take-Home Pay Calculator

Two-child benefit cap removed

One of the most significant welfare changes in years: the two-child limit on Universal Credit's child element has been scrapped from April 2026. Previously, families could only claim the child element (£287.92/month) for their first two children born after 6 April 2017. Now, all qualifying children are included.

For a family with four children, this could mean an additional £575.84 per month in Universal Credit — over £6,900 per year. If you were previously affected by the cap, your UC entitlement should increase automatically.

It's important to note that Child Benefit was never subject to the two-child limit — it has always been payable for every qualifying child. The cap only applied to the child element of Universal Credit and the former Child Tax Credit.

Universal Credit Calculator Child Benefit Calculator

Income Tax thresholds remain frozen

The Personal Allowance (£12,570) and higher rate threshold (£50,270) remain frozen for the fifth consecutive year. With wages rising, this "fiscal drag" continues to push more people into higher tax bands without any change in legislation.

Someone earning £50,000 in 2021/22 was comfortably within the basic rate band. That same salary now sits right at the higher rate threshold. Any pay rise, bonus, or additional income tips them into 40% tax territory. The freeze is estimated to affect millions of additional taxpayers compared to if thresholds had risen with inflation.

Strategic use of pension contributions, salary sacrifice, and Gift Aid can help manage your effective tax rate. Our Salary Sacrifice Calculator shows how much you could save.

What hasn't changed

Several key rates and allowances remain unchanged for 2026/27:

Employee NI: 8% on earnings between £12,570 and £50,270, 2% above
HICBC thresholds: Charge starts at £60,000 adjusted net income, 100% at £80,000
ISA allowance: £20,000 per year across all ISA types
Pension annual allowance: £60,000 (with taper for high earners)
State Pension: £241.30 per week (full new State Pension)
CGT annual exempt amount: £3,000
Marriage Allowance: Up to £252 tax saving per year
Child Benefit rates: £27.05/week (eldest), £17.90/week (additional children)

HICBC Calculator Pension Tax Relief Calculator

Who's affected most?

If you're a…	Key changes to check	Calculator
PAYE employee	Frozen thresholds, fiscal drag	Take-Home Pay →
Company director	Higher dividend tax, employer NI rise	Salary vs Dividends →
Self-employed	Class 2 NI still payable, Class 4 at 6%	Self-Employed Tax →
Parent (3+ children)	Two-child cap removed, more UC	UC Calculator →
Higher earner (£60k+)	HICBC thresholds, pension planning	HICBC Calculator →
Employer / business	NI 15%, threshold £5,000	NI Calculator →

Frequently Asked Questions

Important

This guide reflects our understanding of UK tax rules for the 2026/27 tax year (6 April 2026 – 5 April 2027). Tax legislation is complex and your personal circumstances may differ. This is not financial advice. For specific guidance, consult a qualified tax adviser or accountant.

Last updated: April 2026.