Tax Rates and Allowances 2026/27
Our summary of the UK tax rates and allowances for the 2026/27 tax year, with the Republic of Ireland VAT thresholds alongside them. These are the changes most likely to affect you this year.
Six changes worth knowing about this year
The agricultural and business property relief allowance is £2.5 million, not £1 million
The £1m allowance announced in the October 2024 Budget was raised to £2.5m in December 2025 following consultation. It covers agricultural and business property combined, it is transferable between spouses, and above it relief drops to 50% — an effective inheritance tax rate of 20% on the excess. A great deal of material still in circulation quotes the old £1m figure. If you farm or own a business, this is worth a conversation.
Dividend tax rose two percentage points
From 6 April 2026 the ordinary rate is 10.75% and the upper rate 35.75%. The additional rate is unchanged at 39.35% and the allowance stays at £500. If your salary and dividend split was set before the Autumn Budget 2025, the arithmetic behind it has changed.
Mileage went from 45p to 55p
The approved mileage rate for the first 10,000 business miles rose to 55p from 6 April 2026 — the first increase in fifteen years. Above 10,000 miles it remains 25p.
A lower writing down allowance, and a new 40% first-year allowance
The main pool writing down allowance fell from 18% to 14%. In its place a new 40% first-year allowance applies to new and unused main-rate plant and machinery from 1 January 2026 — and unlike full expensing it is available to sole traders and partnerships, not just companies. The £1 million Annual Investment Allowance is unchanged, so for most unincorporated businesses the AIA still gives faster relief.
Making Tax Digital for Income Tax is live
From April 2026 sole traders and landlords with qualifying income over £50,000 must keep digital records and file quarterly. The threshold falls to £30,000 in April 2027 and £20,000 in April 2028. Qualifying income is gross trading and property income before expenses. No date has yet been set for partnerships.
Business Asset Disposal Relief is now 18%
BADR rose from 14% to 18%, with the £1 million lifetime limit unchanged. If you are planning to sell a business, the timing matters more than it did.
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Rates and allowances for the 2026/27 tax year, correct as at 26 August 2026 and subject to change at the Autumn Budget. England and Northern Ireland rates. This page is a summary for general guidance only and is not advice — figures are simplified and exceptions apply. Please contact us before acting.