The 2026 Spring Statement, delivered on 3 March 2026, was intentionally modest in ambition and delivery. Reflecting the government’s stated preference for a single major fiscal event each year, the Spring Statement was used primarily to set out the economic context and respond to the Office for Budget Responsibility’s latest forecasts, rather than to announce wide-ranging tax reform. Stability and predictability were clearly prioritised over new policy intervention.
However, a quiet Spring Statement should not be read as a neutral one. The Statement reinforced the direction of travel established by earlier fiscal decisions and highlighted the practical consequences of measures already enacted and taking effect from April 2026. In particular, fiscal drag continues to exert a growing influence on the tax burden. As incomes rise while tax thresholds remain frozen or only marginally uplifted, increasing numbers of taxpayers are being pushed into higher tax bands without any formal increase in tax rates.
The absence of any corrective measures in the Spring Statement emphasises the need for careful income management and tax planning as the 2026/27 tax year begins.
Welcome to the 2026/27 Tax Year: New Rules Apply from 6 April
From April 2026, private clients and businesses face a convergence of previously legislated changes taking effect, including:
The Rollout of Making Tax Digital for Income Tax
From 6 April 2026, Making Tax Digital for Income Tax has been introduced for many self-employed individuals and landlords whose qualifying income exceeded £50,000 in the 2024/25 tax year. Qualifying income is assessed by reference to the most recently submitted Self Assessment tax return and is based on gross turnover from self-employment and property activities, rather than taxable profits.
Those within scope must keep digital records and submit quarterly updates to HMRC using approved software, alongside an annual final declaration. Although this reform does not increase tax rates, it represents a significant shift in compliance requirements and is likely to increase administrative complexity, costs and exposure to penalties where reporting obligations are not met accurately or on time.
Dividend Tax Rates Increase
Dividend taxation in the UK has become more expensive for both investors and owner-managed businesses. The basic dividend rate increased to 10.75%, up from 8.75%, while the higher rate increased to 35.75%, up from 33.75%. The additional rate remains unchanged at 39.35%.
The dividend allowance remains at £500, meaning only dividends up to this amount are tax free. Any excess is taxed according to the taxpayer’s applicable dividend tax rate.
Business Asset Disposal Relief and Investors’ Relief Rates Rise
The Capital Gains Tax rate applying to both Business Asset Disposal Relief and Investors’ Relief increased to 18%, up from 14% in the 2025/26 tax year and 10% in earlier years.
Any gains exceeding the relevant lifetime limits continue to be taxed at the standard Capital Gains Tax rates.
Business and Agricultural Relief Is Capped
A single lifetime threshold of £2.5 million per individual now applies to assets qualifying for full (100%) relief across Business Property Relief and Agricultural Property Relief combined. This cap limits the amount of qualifying business and agricultural assets that can be removed entirely from an individual’s inheritance tax exposure.
For married couples and civil partners, unused relief is transferable, meaning that up to £5 million of qualifying business and agricultural assets may pass between them free from inheritance tax.
Any value exceeding this threshold qualifies for relief at 50% only, resulting in an effective inheritance tax charge of 20% on the excess. This represents a significant departure from the previous regime, under which family businesses, farms and AIM-listed shares could benefit from unrestricted 100% relief, materially reducing the inheritance tax protection available to larger estates.
Removal of Class 2 National Insurance for Overseas Individuals
From 6 April 2026, individuals living overseas can no longer make voluntary Class 2 National Insurance contributions. This removes what was previously a relatively low-cost method of preserving entitlement to UK state benefits, particularly the State Pension.
Many affected individuals will now need to consider paying voluntary Class 3 National Insurance contributions instead. As these are significantly more expensive, the affordability of maintaining a UK National Insurance record may change considerably. Individuals with internationally mobile careers should therefore review their position carefully and reassess their longer-term social security and retirement planning.
Autumn Budget 2026 on the Horizon
Looking ahead, the Autumn Budget 2026 is expected to be the next major fiscal event and is more likely to introduce substantive tax measures. It is therefore likely to represent an important opportunity for taxpayers and advisers to review planning strategies and consider emerging tax risks.
Further Information
If you have any questions regarding this blog, please contact a member of our Private Client team.
About the author
Abbie West-Kelsey works across UK personal tax, tax compliance and long-term wealth planning. She advises a diverse client base, including high-net-worth individuals and families, entrepreneurs and internationally mobile clients.
