New Tax Year 2026/27: What Changes on 6 April

The new tax year begins on 6 April 2026 and brings a number of significant changes. The state pension rises under the triple lock, Making Tax Digital for Income Tax Self Assessment launches for higher-earning self-employed individuals, and the continued freeze on personal allowance and tax thresholds means more people will pay more income tax through fiscal drag. Here is a summary of the key changes and what they mean for your finances.

State Pension Increase

The full new state pension rises to £239.70 per week (£12,464 per year) from 6 April 2026, an increase of 4.1% under the triple lock mechanism. The triple lock guarantees that the state pension rises each year by the highest of average earnings growth, CPI inflation, or 2.5%. For 2026/27, the earnings measure was the highest at 4.1%.

The basic state pension (for those who reached state pension age before 6 April 2016) rises to £183.70 per week. Pension credit and other means-tested benefits also increase in line with these upratings.

Making Tax Digital for Income Tax

From 6 April 2026, Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) becomes mandatory for self-employed individuals and landlords with gross income over £50,000. This is the biggest change to the self-assessment system in decades.

Affected taxpayers will need to keep digital records using compatible software and submit quarterly updates to HMRC, rather than filing a single annual self-assessment return. An end-of-period statement and final declaration will replace the traditional tax return.

The £30,000 threshold group is expected to be brought in from April 2027. If you are self-employed or a landlord earning above £50,000, you should already be registered and have compatible software in place. An accountant can help you set up compliant record-keeping.

Personal Allowance and Tax Thresholds

The personal allowance remains frozen at £12,570 and the higher-rate threshold stays at £50,270 for the 2026/27 tax year. These thresholds have been frozen since 2021/22 and are currently legislated to remain fixed until April 2028.

This freeze — often called fiscal drag or stealth taxation — means that as wages rise with inflation, more people are pulled into higher tax bands without any explicit tax rate increase. The Office for Budget Responsibility estimates that the threshold freeze will bring an additional 3 million people into paying income tax or into the higher-rate band by 2027/28 compared to if thresholds had risen with inflation.

National Insurance

Employee National Insurance contributions remain at 8% on earnings between £12,570 and £50,270, and 2% above that. The employer NI rate was increased to 15% from April 2025 as announced in the October 2024 Autumn Budget, with the secondary threshold lowered to £5,000. These employer rates and thresholds continue into 2026/27.

Class 2 NI for the self-employed was abolished from April 2024. Self-employed individuals continue to pay Class 4 NI at 6% on profits between £12,570 and £50,270, and 2% above that.

ISA Allowance

The annual ISA allowance remains at £20,000 for 2026/27. This can be split across cash ISAs, stocks and shares ISAs, innovative finance ISAs, and Lifetime ISAs (subject to the £4,000 LISA sub-limit). The ISA allowance has been frozen at £20,000 since 2017/18.

With the personal savings allowance also unchanged (£1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers, nil for additional-rate taxpayers), cash ISAs remain particularly valuable for higher earners whose savings income exceeds these thresholds.

Pension Annual Allowance

The pension annual allowance stays at £60,000 for 2026/27, having been increased from £40,000 in April 2023. The money purchase annual allowance (for those who have already accessed pension benefits flexibly) remains at £10,000. The lifetime allowance was abolished from April 2024 and has not been reintroduced.

Pension contributions remain one of the most tax-efficient ways to save, particularly for higher and additional-rate taxpayers who receive 40% or 45% tax relief on contributions. Salary sacrifice arrangements can also save on National Insurance.

Capital Gains Tax

The capital gains tax annual exempt amount remains at £3,000 for 2026/27 — a significant reduction from the £12,300 it was just two years ago. CGT rates for most assets were increased from the October 2024 Budget: the lower rate is now 18% and the higher rate is 24% for all assets (previously, lower rates of 10% and 20% applied to non-property assets).

The reduced annual exempt amount and higher rates mean that capital gains tax planning is now more important than ever. Using ISA and pension wrappers, making use of both spouses' allowances, and timing disposals carefully can all help to manage CGT liabilities.

Spring Statement Measures Taking Effect

The Chancellor's Spring Statement on 26 March 2026 was largely a fiscal update rather than a major policy event. No new tax rate changes were announced for April 2026. The government confirmed that the previously announced spending plans remain on track and reiterated the commitment to frozen thresholds until 2028.

The OBR's updated forecasts showed slightly stronger GDP growth than previously expected for 2026, at 1.9%, with inflation forecast to average 2.3% over the year. The next major fiscal event will be the Autumn Budget, expected in October or November 2026.

What Should You Do?

The start of a new tax year is a good time to review your finances. Key actions to consider include maximising your ISA allowance, reviewing pension contributions (especially if you are a higher-rate taxpayer), checking whether Making Tax Digital applies to you, and ensuring you are claiming all the tax reliefs you are entitled to.

If your finances have become more complex — for example, you have moved into the higher-rate band due to fiscal drag, or you have capital gains to manage — it may be worth speaking to a financial adviser or accountant.