Published: 26 April 2026
The new tax year started on 6 April 2026, ushering in transformative changes across income tax, capital gains, inheritance tax, and business reliefs. With Making Tax Digital (MTD) mandates kicking in and rates rising, CFOs must prioritise compliance and planning. This article dissects the key shifts, their implications, and action steps. All sourced from official HMRC updates and professional commentary.
Making Tax Digital for Income Tax Self-Assessment (MTD ITSA)
The cornerstone reform: sole traders and landlords with gross income > £50,000 (2024/25 basis) must now keep digital records and file quarterly updates via MTD software. Thresholds descend to £30,000 (2027) and £20,000 (2028). This replaces annual Self Assessment for mandated users.
- Digital Records: All income/expenses in compatible software (e.g., QuickBooks, Xero).
- Quarterly Updates: Summary submissions every 3 months ending 5 July, Oct, Jan, Apr.
- Final Declaration: End-of-year via software, due 31 Jan.
CFO Impact: Smoother cashflow forecasting but upfront software costs (£100-500/year) and training. Non-compliance risks £100+ penalties per return. HMRC MTD ITSA guidance. Accountants report 70% client readiness gap per AccountingWeb.
Dividend and Capital Gains Tax Hikes
Dividend allowance static at £500, but rates up 2%:
- Basic: 10.75% (was 8.75%)
- Higher: 35.75% (33.75%)
- Additional: 39.35%
CGT: Business Asset Disposal Relief (BADR) rises to 18% (from 14%). Annual exemption £3,000. Frozen personal allowance (£12,570) and higher threshold (£50,270) until 2031 fuel fiscal drag.
CFO Action: Review dividend policies; accelerate qualifying disposals pre-rate hike. PE firms eye mid-market sales amid £85bn dry powder. See Deloitte summary.
Inheritance Tax: APR and BPR Caps
Combined relief capped at £2.5m per person (spousal transfer to £5m). Excess at 50% relief (effective 20% IHT). AIM shares now 50% only. Impacts farms, family businesses.
Planning: Lifetime transfers or trusts pre-6 Apr. HMRC APR/BPR (forthcoming updates expected).
Business and Employment Taxes
- Capital Allowances: Main pool WDA down to 14% (from 18%), but 40% FYA for new assets from Jan 2026. EV incentives extended.
- Directors’ Loans: S455 CT up to 35.75% for loans post-6 Apr.
- Carried Interest: Now within Income Tax/NIC (34%+ effective).
- NI: Voluntary Class 2 abroad ends; small employers’ relief to 9%.
- Homeworking Relief: Abolished unless employer-reimbursed.
CFO Lens: Optimise capex timing for FYAs; monitor director accounts quarterly. Gaming duties spike to 40% hits remote operators.
Broader M&A and PE Context
Tax tweaks coincide with PE resurgence: deal values up 28% YoY despite 12% volume drop. BADR hike may trigger owner sales. Notable: RedBird buys Affinia; KeyCorp acquires Clearwater UK. KPMG M&A Outlook.
Action Plan for Compliance
- Assess MTD eligibility via HMRC letter or income review.
- Procure/test software; train staff/clients.
- Model dividend/CGT impacts on forecasts.
- Review IHT exposure for estates >£2.5m.
- Schedule capex pre-31 Mar 2027 for reliefs.
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