Personal Tax Guide 2026

Position as at: January 2026 (tax year 2025/26 in progress)

This handout is for general information only and is not personal tax advice. Tax rules change and outcomes depend on your circumstances. If you are unsure, take professional advice.

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Quick checklist - what to do now

Most people benefit from doing these 6 things:

• Keep a simple tax folder (payslips/P60/P11D,  bank interest, dividends, pension statements, property income and expenses,  Gift Aid records).

• If you complete Self Assessment, plan for key  dates: 31 January (online filing deadline and balancing payment) and 31 July  (second payment on account).

• Use ISA allowances where suitable to shelter  interest, dividends and capital gains.  

• If you rent out property, keep good records  and understand how finance cost relief works.  

• If you are self-employed (or have side  income), get ready for Making Tax Digital (MTD) if you are in scope from  April 2026.  

• If you are making large gifts or planning  succession, review Inheritance Tax (IHT) changes coming in 2026 and 2027.

Key allowances and rates (headline figures)

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Income tax rates

National insurance contributions

Personal allowance

Capital gains tax

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Income tax - how it works (in brief)

Your income is taxed in bands. Most people have a tax-free Personal Allowance and then pay basic, higher or additional rate depending on total taxable income.

Common types of income include: employment income, self-employment profits, pensions, rental income, savings interest and dividends.

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Savings and dividends

Savings interest may be tax-free if covered by the Personal Savings Allowance or the Starting Rate for Savings (where you have low non-savings income).

Dividends above the dividend allowance are taxed at dividend rates based on your income tax band. Dividends received within an ISA are tax-free.

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Announced changes to watch (Autumn Budget 2025)

The course notes highlight several measures announced at the Autumn Budget 2025. The most relevant for many clients are summarised below.

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- Dividend tax: ordinary and upper dividend rates increase by 2 percentage  points (additional rate unchanged).  (Effective from 6 April 2026)

- Making Tax Digital (MTD) for Income Tax starts for many people with  qualifying income over GBP 50,000. (Effective from 6 April 2026)

- Incorporation relief becomes claim-based (not automatic) when  transferring a business to a company. (Effective from 6 April 2026)

- Inheritance Tax: new structure for business and agricultural reliefs  (BPR/APR) takes effect (see IHT section). (Effective from 6 April 2026)

- New tax rate structure for property income (England/Wales/Northern  Ireland) and higher savings rates. (Effective from 6 April 2027)

- Inheritance Tax: unused pension funds and death benefits become  within scope of IHT on death. (Effective from 6 April 2027)

Property income - landlords and holiday lets

If you rent out property, keep records of income and allowable expenses. Special rules apply to residential finance costs (mortgage interest), and different rules can apply to furnished holiday lets and short-term lets.

From 6 April 2027, property income in England/Wales/Northern Ireland is scheduled to be taxed using a new set of property income rates, and finance cost relief is given at the property basic rate.

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Capital Gains Tax (CGT) - the essentials

CGT can apply when you sell, give away or otherwise dispose of assets (such as shares, second homes or investment property). Each individual has an annual exempt amount (see Key figures).

If you sell your main home, Private Residence Relief can reduce or eliminate CGT, but strict conditions apply (especially if you have not lived there throughout, or have let it out).

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Employee Ownership Trusts (EOT) - change from 26 November 2025

For qualifying disposals of shares to an Employee Ownership Trust (EOT) on or after 26 November 2025, the seller is taxed on 50% of the gain and the remaining 50% is held over to the trustees disposal. Claiming this relief means you cannot also claim Business Asset Disposal Relief (BADR) or Investors Relief on the same disposal.

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Incorporation relief - claim required from 6 April 2026

If you transfer a business to a company in exchange for shares, incorporation relief can defer CGT, but from 6 April 2026 it is expected to require a claim in your Self Assessment return (with computations and details).

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Making Tax Digital (MTD) for Income Tax

MTD requires digital record-keeping and regular submissions to HMRC. From 6 April 2026 it is expected to apply to many people with qualifying income over GBP 50,000 (for example, self-employed people and landlords).

If you are likely to be in scope, start preparing: keep digital records, choose compatible software, and plan for quarterly updates as well as the year-end return.

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Winter Fuel Payment charge (from 6 April 2025)

A new charge can apply where a Winter Fuel Payment (or Scotlands equivalent) is received and the individuals annual income is over GBP35,000. The charge is equal to 100% of the payment (no taper). Collection is expected mainly via PAYE or via Self Assessment for those already in SA.

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Inheritance Tax (IHT) - headline points

IHT is generally charged at 40% on estates above the available nil-rate bands, subject to exemptions and reliefs. Spouse/civil partner transfers are usually exempt, and gifts to charity can be exempt.

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Business and agricultural reliefs (BPR/APR) - major reform from 6 April2026

From 6 April 2026, 100% relief for qualifying business or agricultural property is expected to be capped at GBP 2.5 million. Values above the cap receive 50% relief. Transitional rules may affect lifetime gifts made between 30 October 2024 and 5 April 2026 if death occurs within 7 years.

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Pensions and IHT - change from 6 April 2027

From 6 April 2027, unused pension funds and death benefits are expected to be brought within the scope of IHT on death. This could change how beneficiaries receive pension death benefits and how estates are administered.

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ISAs and tax-free saving

ISAs allow you to shelter interest, dividends and capital gains from tax. The annual subscription limit is GBP 20,000 for 2025/26 (rules apply).

From 2026/27, the course notes indicate a cash ISA limit of GBP 12,000 within the overall GBP 20,000 ISA allowance, with special treatment for savers over age 65.

Key dates and deadlines

31 January: Online Self Assessment filing deadline and balancing payment (plus  first payment on account where relevant).

31 July: Second payment on account where relevant.

6 April 2026: Dividend rate rise; MTD (first wave); incorporation relief claim  requirement; BPR/APR cap begins.

6 April 2027: New property and savings rate structure; pensions within IHT.