What’s changing in the 2026/27 tax year for businesses and sole traders

In England, Wales, and Northern Ireland, the Personal Allowance and National Insurance (NI) thresholds are set to remain frozen until 2031.

In Scotland, the higher-, advanced-, and top-rate Income Tax thresholds will remain frozen. Meanwhile, the basic and intermediate rate thresholds will increase by 7.4% from April 2026, offering some protection for lower and middle earners.

While frozen thresholds don’t represent an official tax increase, they are likely to result in higher tax bills over time, as rising incomes will pull more earnings into tax. This is why such measures are sometimes known as “stealth taxes”. The freeze could also increase pressure on you if you’re an employer, as staff might want additional benefits or higher salaries to offset the impact on their pockets.

Corporation Tax will remain set at 25%, with marginal relief still available for businesses with profits below £250,000, down to a minimum of 19% for companies with profits under £50,000.

Additionally, from April 2026, there will be further support for smaller businesses in certain sectors.

More than 750,000 retail, hospitality and leisure businesses in England with properties with a rateable value under £500,000 will receive a 5p reduction in the business rates multiplier.

The business rates multiplier is the tax rate used to turn a property’s rateable value (an estimate of how much it could be rented for in a year) into a business rates bill.

This change will be funded by an increase in the multiplier for properties with a rateable value over £500,000.

Meanwhile, pubs and live music venues in England and Wales are also set to get 15% off their business rates bill, worth an average of £1,650 for each. The new relief has been described as a drop in the ocean for the struggling night-time and hospitality sector.

Changes to Dividend Tax rates will come into effect from 6 April, so if you receive dividend income from your business or elsewhere, you might want to assess your income sources as you could face a higher tax bill.

The rates will rise by two percentage points for basic- and higher-rate taxpayers, while the additional rate will remain unchanged.

This means dividend income above the £500 allowance will be taxed at:

• 10.75% for basic-rate taxpayers
• 35.75% for higher-rate taxpayers
• 39.35% for additional-rate taxpayers (unchanged).

While dividends will still be taxed more favourably than employment income, the gap between the two is narrowing.

As such, it’s a good idea to work with an independent financial planner to review how you draw your income to ensure your take-home pay remains aligned with longer-term plans.

Making Tax Digital (MTD) became compulsory for all VAT-registered businesses in 2025, and will be rolled out to sole traders, the self-employed, and landlords from April 2026.

Anyone who is self-employed or receives property income with qualifying earnings above £50,000 a year will be required to follow the new system.

MTD replaces the annual Self-Assessment process with more frequent digital reports.

If it applies to you, you’ll need to keep all your income and expense records in approved formats and submit financial updates to HMRC every quarter.

At the end of the tax year, you’ll also need to complete an End of Period Statement (EOPS) for each business or property income source. This is when the figures are finalised, and you can claim any allowances or reliefs.

Your accountant can help you prepare your books for MTD and ensure you have everything in place for the transition.

Statutory pay levels typically rise each year, and the rates will increase from 6 April 2026.

The new rates will be:

• £12.71 an hour for the National Living Wage
• £10.85 an hour for the National Minimum Wage
• £8.00 an hour for the apprentice rate.

However, there is some positive news for businesses considering apprenticeships, as from April 2026, apprenticeships for under-25s will be fully funded.

These changes could have an impact on your costs if you employ lower-paid or junior-level staff, so it’s important to factor them into your business’s financial planning.

Business Relief (BR) and Agricultural Relief (AR) are Inheritance Tax (IHT) allowances that can apply to your estate if you have qualifying assets. Depending on the asset, you can claim either 100% or 50% relief. Under the current rules, there is no limit on the amount of relief you can claim.

However, from 6 April 2026, assets that currently qualify for 100% BR and AR will be limited to a combined cap of £2.5 million. This is an increase from the initially proposed £1 million limit.

Any eligible assets above this threshold will instead receive 50% relief, meaning your estate will pay an effective IHT rate of 20%.

Originally, the allowance was going to be non-transferable, but the government has since confirmed that you can transfer any unused BR or AR allowance to your spouse or civil partner.

This means you and your partner could pass on up to £5 million of qualifying business or agricultural assets free from IHT, provided your estate is structured properly.

An independent financial planner can help make any necessary adjustments to your estate plan to ensure you are prepared to make the most of the new limits.

Beyond the changes coming in the next year, several longer-term measures could affect businesses and sole traders that are worth remembering.

For example, from 2029, NI relief on pension contributions made via salary sacrifice will be limited to the first £2,000 of income sacrificed each year.

Another significant proposal is the introduction of a mansion tax from April 2028. Properties in England valued at over £2 million will be subject to an annual charge ranging from £2,500 to £7,500. A separate but broadly similar policy has also been proposed in Scotland for properties worth over £1 million.

So, if you hold high-value business property, you could be affected by this policy, and it’s a good idea to start building it into your financial planning now.