Personal Tax Changes Taking Effect from Monday

With the new tax year starting on Monday, 6 April 2026, several personal tax changes are set to take effect, and some could hit your finances harder than you expect. From higher dividend taxes to capped inheritance reliefs and rising National Insurance contributions, these updates matter to everyone, from the employed to the self-employed, and from those running businesses to those investing in property.

Here’s a breakdown of all the personal tax changes coming our way.

Dividend Tax

From April 2026, the tax rates applied to dividend income paid by UK companies are increasing. The basic‑rate Dividend Tax rate rises to 10.75% and the higher‑rate Dividend Tax rate increases to 35.75%. The additional rate remains at 39.35%.

These changes mean the tax cost of drawing income in the form of dividends is higher, particularly for owner‑managed companies where dividends make up a large portion of director remuneration.

National Insurance & Voluntary Contributions

For those making voluntary National Insurance (NI) contributions, especially the self‑employed or those seeking to protect their State Pension record, there are new contribution rates to remember from 6 April 2026.

The weekly rate for Class 2 contributions increases from £3.50 to £3.65, while the rate for Class 3 contributions rises from £17.75 to £18.40. Alongside the rate changes, a key policy shift removes the option to make voluntary Class 2 contributions for periods worked overseas, meaning some individuals may have to use the more expensive Class 3 route instead.

Capital Gains Tax

If you’re a business owner thinking about selling your company or restructuring, it’s important to note a key change this tax year. Gains that qualify for Business Asset Disposal Relief (BADR) or Investor’s Relief are no longer taxed at 14%. From April 2026, the rate rises to 18%.

It’s worth highlighting that “relief” doesn’t mean you pay no tax. Instead, it reduces the amount of Capital Gains Tax (CGT) you owe on eligible gains. For example, without relief, your gain might be taxed at 20% or 28%, depending on your income bracket. With BADR or Investor’s Relief, the rate is capped (now at 18%) which can still save a substantial sum, but it’s not completely tax-free.

Inheritance Tax Relief Changes for Business & Agricultural Property

Perhaps the most significant change happening from Monday concerns Inheritance Tax (IHT) reliefs on agricultural and business property. Historically, these reliefs, known as Agricultural Property Relief (APR) and Business Property Relief (BPR), could apply without limit to qualifying assets passed on death.

However, from 6 April 2026, that will no longer be the case. The combined relief for APR and BPR is now capped at £2.5 million per individual. Above that limit, relief reduces to 50% on qualifying values. However, any unused portion of the cap can be transferred to a spouse or civil partner, effectively allowing up to £5 million of assets to benefit from full relief between couples.

For estates with substantial business and agricultural assets, this reform introduces an additional potential Inheritance Tax cost where planning steps hadn’t previously been necessary.

Summary of Personal Tax Changes

Conclusion

The combined effect of these changes means April 2026 is not simply a routine tax-year refresh. This month brings higher taxes on investment income, business exits, estate transfers and state pension top-up contributions.

Even where headline rates remain frozen, the continued use of threshold freezes and relief caps means many individuals will pay significantly more tax over the coming years.