How to reduce the impact of the April tax increases

Frozen tax rates

The freezing of income tax thresholds in England, Wales and Northern Ireland has now been extended to April 2031. Taxpayers on modest incomes will pay more tax as inflation bites. As the income tax personal allowance of £12,570 is frozen until 2031, this will impact basic rate taxpayers as more of your income effectively becomes subject to tax. Similarly, as the basic rate top threshold is frozen at £50,270, more of your income is subject to the 40% higher rate as inflation increases your income. 

Tax tip – Can transferring assets improve your tax position? 

It is possible to gift some income-producing assets you own to your spouse or civil partner and save tax. Generally, for this to work, your gift must be to your spouse or civil partner (from whom you have not separated) and be an unconditional gift. Professional advice should always be taken, so your individual circumstances can be reviewed prior to taking action. 

Basic rate taxpayers may also be able to transfer £1,260 of their unused personal allowance to their spouse or civil partner to save tax by using the Marriage Allowance. This only applies where neither of you is a higher or additional rate taxpayer. 

Business Asset disposal relief 

Business Asset Disposal Relief is being changed from April 2026, with an increase in the rate of tax on the sale of your business and business assets to 18%.

Tax tip – Plan your retirement or sale 

If you’re considering selling your business or business assets, seeking professional help from the very beginning is essential in managing your tax. Getting proactive tax planning advice could save you significant sums of money. Beware anti-forestalling measures which mean if you plan a sale of business assets without professional advice, the tax planning may fail and leave you worse off. 

Scottish income tax changes 

As announced in the Scottish Budget, the thresholds for the starter, basic and intermediate tax rates in Scotland will be increased. 

	2025/26		2026/27
	Band	Rate	Band	Rate
Starter	£12,571*- £15,397	19%	£12,570 - £16,537	19%
Basic	£15,398 - £27,491	20%	£16,538 - £29,526	20%
Intermediate	£27,492 - £43,662	21%	£29,527 - £43,662	21%
Higher	£43,663 - £75,000	42%	£43,663 - £75,000	42%
Advanced	£75,001 - £125,140**	45%	£75,001 - £125,140**	45%
Top	Over £125,140	48%	Over £125,140	48%

*Assumes individuals are in receipt of the standard Personal Allowance.  

**Those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000. 

Tax tip – Speak to your accountant for tax planning advice 

If you’re going to be affected by the changes to the Scottish income tax thresholds and rates, speaking to your accountant for advice could help manage your taxes more effectively. 

Tax planning strategies, including making charitable donations, pension contributions and tax-efficient investing, could make small but efficient changes. 

New higher dividend income tax rates  

The dividend basic and higher income tax rates will increase by 2%. The following rates apply from 6th April 2026:  

Basic rate taxpayer	10.75%
Higher rate taxpayer	35.75%
Additional rate taxpayer	39.35%

Tax tip – Make sure your remuneration strategy is tax efficient 

Recipients of dividend investment income and company owners who extract profits through dividends will now face higher tax bills resulting from the higher dividend tax rates. Where a strategy of low salary and higher dividends was often the most tax efficient choice in the past, this is now not always the case and is highly dependent on the level of profits you wish to extract. 

For company owners, a review of your remuneration strategy with your accountant could ensure that the way you extract your profits is the most efficient one. 

High Income Child Benefit Charge changes  

Previously, if you were liable for the High Income Child Benefit Charge (HICBC) and did not already have to file a self-assessment tax return, you were obliged to file a return in order to report the HICBC and pay the charge. However you can now pay the HICBC through PAYE if you do not need to file a tax return for another reason.  

Tax tip – Register for child benefit and opt out of payments  

To ensure you’re getting NICs credits, which count towards your state pension, you should still register for child benefit even if you or your partner earns over the £80,000 (2026/27) adjusted net income threshold at which the HICBC cancels out all of the child benefit you could receive. You should state on the child benefit form that you do not want to get payments. 

Pension salary sacrifice – contributions to be capped 

At the Autumn Budget 2025 the Government announced that from April 2029, pension contributions made via an employer salary sacrifice scheme would only be free of NICs for the first £2,000 per employee. Currently there is no limit to NIC-free pension contributions under salary sacrifice. If you currently use a pension salary sacrifice scheme for your employees, this may mean higher NICs bills in future.  

Tax tip – Make the most of pension salary sacrifice now  

Unusually, there was no anti-forestalling legislation announced alongside the rule change. It therefore makes sense to continue to utilise existing pension salary sacrifice schemes as long as possible, and even to explore setting one up now to make cost-efficient pension contributions for your employees before April 2029.  

Other changes 

Capital Allowances changes  

A new 40% First Year Allowance (FYA) is available for qualifying plant and machinery acquired from 1st January 2026 for companies and unincorporated businesses. If you are unable to access full expensing or the Annual Investment Allowance – for instance because your business is unincorporated or the assets are used for leasing – then this new FYA may be a helpful relief to claim. 

At the same time, the main rate writing down allowance will reduce from 18% to 14%, which means assets in your main rate pool will receive relief more slowly in the second and subsequent year of ownership or if they do not qualify for any FYAs. This rate reduction begins on 1st April 2026 for companies and 6th April 2026 for sole traders. 

Business rate changes   

Business rate support for the retail, hospitality and leisure (RHL) sector has been increased. You can read more on business rates in our comprehensive guide. New, lower multipliers for the RHL sector were announced at the Autumn 2025 Budget plus a Pub and Live Music Venues Relief announced in January 2026 will begin at the start of the tax year. You may be eligible to other business rates reliefs available, so always check with your local council.   

National Minimum Wage 

From 1st April 2026, the national living wage (NLW) goes up from £12.21 to £12.71 an hour for employees age 21+. 

The national minimum wage (NMW) for 18- to 20-year-olds goes up from £10 to £10.85 per hour and the NMW for 16- and 17-year-olds plus apprentices rises from £7.55 to £8 per hour. 

The employers rate of Class 1 National Insurance Contributions (NICs) remains at 15%, which you generally start to pay on your employees’ wages at £5,000. 

Being prepared for the rise in your wages costs is essential in ensuring your business’ cashflow can cope.  

How TaxAssist Accountants can help 

Dedicating time now to look ahead at the next financial year will mean you have a robust plan in place. As business experts our team can help you. Call us on 01494 778900 or use our online contact form. 

 

Last updated: 26th February 2026