What are the new tax changes for 2026?
From April 2026, significant tax changes take effect in the UK – including higher dividend tax rates, altered National Insurance rules for salary sacrifice pension contributions, and a prolonged freeze on income tax thresholds.
The Autumn Budget 2025 introduced these changes as part of the government fiscal strategy. Here is a practical breakdown of what changes and what stays the same.
Dividend Tax Rates Increase from April 2026
One of the most significant personal tax changes is the 2% increase in dividend tax rates from 6 April 2026:
- Ordinary rate: rises from 8.75% to 10.75%
- Upper/further rate: rises from 33.75% to 35.75%
- Additional rate: unchanged at 39.35%
These rates apply to dividend income above the GBP 500 dividend allowance. If you hold shares in a non-pension portfolio, dividend tax rises mean higher tax bills from April 2026 onwards.
National Insurance Changes: Salary Sacrifice Pension Contributions
From April 2026, employer pension contributions made via salary sacrifice arrangements will attract Class 1A National Insurance at 15% (employer rate) rather than the previous concessionally low treatment. This specifically targets salary sacrifice arrangements used to reduce both income tax and NICs simultaneously. Employees who use salary sacrifice to fund pensions will see employer NIC savings reduced, making these arrangements less tax-efficient.
Income Tax Thresholds Frozen Until April 2031
The Autumn Budget 2025 confirmed that income tax and NICs thresholds – including the personal allowance (GBP 12,570), higher rate threshold (GBP 50,270), and NICs primary threshold – will remain frozen until April 2031. This means inflation will gradually drag more income into higher tax bands without any actual increase in rates.
Other Notable 2026 Changes
- VCT income tax relief: reduced to 20% from April 2026 (from 30%), with EIS relief widened
- Notional dividend tax credit: abolished from April 2026 for certain non-UK residents holding UK equities
- Cash ISA limit: falls to GBP 12,000 from April 2027
- Saving rates tax: increases by 2% from April 2027
- Personal allowance: rises by September 2025 CPI (3.8%) to approximately GBP 13,050 for 2026/27
What Does Not Change in 2026
- Basic rate of income tax remains at 20%
- Higher rate remains at 40%
- Additional rate remains at 45%
- Corporation tax main rate remains at 25%
- Capital gains tax residential property rates remain at 18%/28%
Planning Implications
The dividend tax increase makes investing through ISAs more valuable – dividends within an ISA are tax-free. The salary sacrifice NIC change reduces the net benefit of sacrificing salary into pensions, though pension contributions remain highly tax-efficient. The frozen thresholds mean gradual fiscal drag – more UK residents will be pulled into higher rate tax over the coming years.
