PERSONAL TAX
INCOME TAX
No increase in employment and self-employed Income Tax rates.
However, the following types of income will have tax increases, at different dates:
- Dividend income tax rates will increase by 2% from 6 April 2026, apart from the additional rate, which will remain at 39.35%. From April 2026, the basic rate dividend income tax will be 10.75% (currently 8.75%), and higher rate 35.75% (currently 33.75%).
- Savings income tax rates will increase by 2% from April 2027. The basic rate will increase to 22% (currently 20%), higher rate 42% (currently 40%) and additional rate of 47% (currently 45%). The savings allowances remain, £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. There is no savings allowance for additional rate taxpayers.
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Rental income tax rates will increase by 2% from April 2027. with the basic rate increasing to 22% (currently 20%), the higher rate 42% (currently 40%) and additional rate 47% (currently 45%). The finance cost relief (the deduction for interest costs on mortgages set against the total liability), will be increased from 20% to 22%, to match the basic rate tax costs.
No increase in Personal Allowances & thresholds - there will be a further extension to the freeze on Income Tax and National Insurance Contributions thresholds, which were frozen until April 2028, and now been extended to 2031. This is what is referred to as fiscal drag, as the allowance and thresholds do not increase, but taxpayers’ income does dragging more people in to paying tax, or higher rates, estimated to be 800,000, and raise £8bn.
Pension salary sacrifice will be capped at £2,000 per annum from April 2029. Salary Sacrifice is where an employee can sacrifice their salary and their employer contributes to the employees’ pension, saving the employee PAYE and the employer NIC. Used by many employees to protect entitlement to child benefit, protect personal allowance or avoid becoming an additional rate taxpayer. From April 2029 you can still sacrifice salary for pension contributions, but only up to £2,000 will be both employee and employer NIC free, the balance over this cap will be subject to NIC. The contribution will still be income tax free provided within the normal annual contribution limits (currently £60,000), subject to any carry forward of unused pension allowances.
ISA’s Cash ISA for the under 65’s capped at £12,000 from April 2027, but the total ISA limit remains £20,000, so the balancing £8,000 has to be invested in stocks and shares.
VCT Tax Relief on initial investment to be cut from 30% to 20% from April 2026.
State Pension increasing by 4.8% from April 2026 to maintain the triple lock obligation.
Student loan threshold the point at which the loan has to be repaid frozen, in line with the freezing of thresholds and allowances.
Non-UK Tax Residents to be limited on qualifying for UK state pension by removing the ability for individuals to increase their entitlement by paying voluntary class 2 NIC.
CAPITAL GAINS TAX
No changes to Capital Gains Tax rates, or the main relief Business Asset Disposal Relief.
Per the last Budget announcement, the Business Asset Disposal Relief will increase from 14% to 18% on 6 April 2026.
The Capital Gains Tax Annual Exemption (amount of gain that is tax free) remains at £3,000.
The tax rate applied to the sale of a business to employees (Known as an Employee Ownership Trust), will increase from being zero, to 50% of the gain being chargeable to Capital Gains Tax at the normal rates (24%), but we presume Business Asset Disposal Relief can apply if eligible. Awaiting more detail.
INHERITANCE TAX
No announcements/change for Inheritance Tax.
It was hoped that the changes to Business Property Relief and Agricultural Property Relief announced in the Budget last year being limited to £1m would be softened. It was announced that married couples can pass their allowance for Agricultural Property Relief and Business Property Relief to their spouse if they died not having used it.
PROPERTY TAXES
No increases to Stamp Duty Land Taxes, holidays, or reliefs.
A High Value Council Tax Surcharge will be introduced from April 2028 for residential properties worth more than £2m. The charge will be collected alongside the property owner’s council tax. The Valuation Office Agency will conduct an exercise to identify properties above £2m, and the charge will increase in line with CPI inflation.
The charge structure:
Property Value Charge
£2m-£2.5m £2,500
£2.5m to £3.5m £3,500
£3.5m to £5m £5,000
£5m + £7,500
BUSINESS TAXES
EMPLOYMENT TAXES
No changes to the rates of NIC.
As per above in respect of Income Tax, the thresholds have been frozen to 2031.
Enterprise Management Incentive (“EMI”) a tax efficient share scheme to recruit, retain and reward key employees is being expanded to increase the number of companies eligible to use the scheme, with some measures immediate and others in April 2026.
From April 2026 companies that can qualify to use EMI will increase by the following conditions expanding:
- Employee test 500 (currently 250)
- Share option limit to £6m (currently £3m)
- Gross asset test quadrupling to £120m (currently £30m)
- Maximum holding period 15 years (currently 10 years).
National Living Wage rises to £12.71 an hour for over 21s from April 2026.
National Minimum Wage for younger workers rises sharply to £10.85 for 18- to 20-year-olds and £8.00 for 16- to 17-year-olds and apprentices.
The cost of training for apprentices aged under 25 to be made free for small businesses.
Pension Salary Sacrifice NIC benefits capped at £2,000, as explained in the income tax section.
CORPORATION TAX
No changes to the rates of Corporation Tax, which the Chancellor confirmed again, would remain at the current levels for this term of Parliament.
New 40% first year allowance for most main rate Capital Assets from 1 January 2026 available to companies and unincorporated businesses. However, with the £1m Annual Investment Allowance still available, this will have little impact for most of Harbour Key clients.
For those who still have general pools of assets writing down annually, the rate of the annual writing down will reduce from 18% to 14%, thereby reducing the amount that can be claimed in a year but extending the period the assets are written down over. As most clients claim the Annual Investment Allowance, asset pools are not that common.
We would expect Section 445 tax charge on overdrawn loan accounts to increase in line with the dividend rate rise, to 35.75%.
BUSINESS INVESTMENT
From April 2026 an increase in the limits and qualifying conditions announced for venture capital schemes (EIS & VCT) that fund early-stage business, where the investors are entitled to tax reliefs, to help raise capital:
- The annual company investment limit has been increased to £10m (currently £5m), and for a knowledge intensive company £20m (currently £10m).
- Lifetime company limit will increase to £24m (currently £12m) and £40m for a knowledge intensive company, (currently £20m).
- Gross asset test for qualification for EIS, increasing to £30m before share issue, and £35m after share issue (currently £15m and £16m respectively).
Listings on the London Stock exchange exempt from Stamp Duty Reserve Tax for three years.
UK Research & Innovation will focus investment in eight industrial strategy growth sectors (for example clean energy, health resilience, and national security), with £29bn of funding.
A consultation has been launched on tax support for entrepreneurs, seeking views on the effectiveness of existing tax incentives for business owners and scaling businesses.
VAT
No major changes to the VAT regime (in particular no increase in the VAT threshold currently £90k).
E-invoicing mandatory for all VAT invoices from April 2029.
BUSINESS RATES
Business Rates reform package announced including the lower multipliers for retail, hospitality and leisure properties, which were a temporary measure introduced post the Covid pandemic, will become permanent.
A new higher value multiplier for premises with a rateable value of £500,000 or more from April 2026.
Small Business Rate Relief grace period extended from one year to three years for businesses that expand into a second property.
For retailer and other businesses with an increase in business rates:
- £3.2bn transitional relief scheme providing support to the largest ratepayers.
- A £500m fund to help the smallest businesses.
DUTIES/RATES
Fuel Duty rates frozen until September 2026, with staged increases thereafter. From April 2027, the fuel duty rates will be updated annually by RPI.
Electric Vehicle Excise Duty being introduced from April 2028 as mileage-based charge – 3p per mile electric and 1.5p for hybrid. How this is to work and its collection to be consulted on, but currently electric vans, trucks and motorcycles exempt. Currently proposed that drivers self-report, with a check being conducted via the MOT, or for new cars at annual service time.
Expensive car supplement for electric cars to increase from £40,000 to £50,000 to encourage more people to change, despite the EV excise duty announced. (The expensive car supplement is an additional road tax charge for expensive cars).
Alcohol & tobacco duty will increase in line with the retail price index inflation.
OTHER TAXES/POINTS
From March 2029 at the latest, the Customs Duty relief on low value items (currently below £135), will be abolished.
Gambling – Remote gaming (online) duty is to effectively double from April 2026, while bingo duty is scrapped, casino tax and horserace betting (in person or online) frozen.
The Child Benefit 2 child cap abolished.
Not a tax measure, but the Government is consulting on non-compete clauses in employment contracts, which it feels is a barrier to doing business in the UK, impacts growth and competition.
HMRC/ENFORCEMENT
£25m investment over five years to recruit additional insolvency service staff, and changes to the Company Directors Disqualification Act, to disqualify more rogue directors.
A small business evasion and enforcement team to be set up with HMRC to target high street illegal mini-marts, barbershops, vape shops etc, which have made the news recently re money laundering, tax evasion, etc.
Areas on which awaiting further information where Tax Impact Notes have not been issued
• Abolition of the dividend tax credit for non-UK residents;
• Aligning PAYE and Overseas Workday Relief;
• Annual Tax on Enveloped Dwellings - availability of relief;
• Capital Gains Tax - Employee Ownership Trusts;
• Capital Gains Tax: Incorporation Relief claims;
• Capital Gains Tax: non-resident capital gains;
• Capital Gains Tax: share exchanges and reorganisations;
• Capping inheritance tax trust charges for former non-UK domicile residents;
• Changes to Employee Car Ownership Schemes for Income Tax;
• Corporation Tax: increases to late filing penalties;
• Cryptoasset Reporting Framework: reporting of UK resident cryptoasset users;
• Income Tax: removal of the tax relief for additional homeworking expenses;
• Inheritance Tax - Agricultural property relief and business property relief;
• Inheritance Tax: anti-avoidance measures for non-long-term UK residents and trusts;
• New first-year allowance and main rate of writing-down allowances;
• Reforming and requiring tax adviser registration with HMRC;
• Tackling promoters of marketed tax avoidance;
• Tackling tax adviser facilitated non-compliance.
