If you run a UK business, 6 April 2026 is the date to know. It marks the start of the biggest shake-up to tax reporting in a generation, alongside a handful of quieter but costly changes to Corporation Tax, National Insurance and dividend rates. Some of these changes are now in effect; others are still ahead. This guide pulls every 2026/27 change into one place, sorted by business type, so you know exactly what applies to you and what to do about it.
The April 2026 UK Tax Landscape: What is Changing?
The headline change is Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), which became mandatory on 6 April 2026 for sole traders and landlords earning above £50,000. Alongside it, Corporation Tax bands, dividend tax rates, National Insurance thresholds and HMRC’s penalty system have all shifted for the 2026/27 tax year.
The Shift Toward “Simplification, Modernisation, and Fairness”
HMRC has framed these reforms around three goals: replacing paper-based, once-a-year reporting with real-time digital records; closing the “tax gap” caused by error and late filing; and levelling the playing field between employed, self-employed and incorporated taxpayers. In practice, that means less flexibility on how and when you report, but — HMRC argues — fewer surprises at year-end because you’re tracking figures quarterly instead of scrambling every January.
Key Implementation Dates for the 2026/27 Tax Year
| Date | Change |
|---|---|
| 6 April 2026 | MTD for ITSA becomes mandatory for sole traders and landlords with qualifying income over £50,000 |
| 6 April 2026 | Dividend tax rates rise: basic rate to 10.75%, higher rate to 35.75% |
| 6 April 2026 | Business Asset Disposal Relief CGT rate rises to 18% |
| 6 April 2026 | New MTD points-based penalty system takes effect for those in scope |
| 31 January 2028 | First fully digital Final Declaration due, covering the 2026/27 tax year |
| 6 April 2027 | MTD for ITSA threshold drops to £30,000 |
| 6 April 2028 | MTD for ITSA threshold drops to £20,000 |
Making Tax Digital (MTD) for ITSA: The 2026 Milestone
Direct answer: From 6 April 2026, sole traders and landlords with qualifying gross income over £50,000 must keep digital records and send quarterly updates to HMRC using compatible software, instead of filing a single annual Self Assessment return.
Who is Affected on 6 April 2026? (The £50,000 Threshold)
HMRC determined who falls into this first wave by looking at the gross income declared on your 2024/25 tax return — the one filed by 31 January 2026. If that return showed combined trading and property income above £50,000, you’re in scope now, whether or not HMRC sent you a letter confirming it. The obligation is yours to check, not just wait for HMRC to tell you.
Crucially, the threshold is based on gross income (turnover), not profit. A landlord with £60,000 in rent and heavy mortgage interest costs that leave only £15,000 in taxable profit is still mandated, because the £50,000 test looks at receipts before expenses.
A small number of people qualify for a temporary exemption until April 2027 — mainly those with trust income, non-residence claims, or farmer’s/creative artist’s averaging relief on their 2024/25 return. If you’re digitally excluded (for religious, disability, age, or connectivity reasons), you can also apply for an exemption directly with HMRC.
How the Cumulative Income Rule Works (Combining Rental and Sole Trader Income)
This is where most guidance falls short, and it’s the single most common cause of confusion. HMRC doesn’t assess your sole trader income and your rental income separately. It adds them together.
Worked example: Sarah runs a freelance design business earning £30,000 a year, and she also lets out a flat for £25,000 a year in rent. Neither figure alone crosses £50,000. Added together, her qualifying income is £55,000 — so she’s mandated into MTD for ITSA from 6 April 2026, for both income streams.
The same logic applies if you have more than one self-employment or more than one rental property: HMRC aggregates every trade and every letting business you run personally.
Joint and Jointly Owned Properties under MTD for ITSA
Where a property is owned jointly — a husband and wife, or business partners who aren’t in a formal partnership — each owner is only assessed on their own share of the rental income, not the total. So if a couple jointly own a property generating £70,000 in rent and split ownership 50/50, each partner’s qualifying income from that property is £35,000, not £70,000. That share is then added to any other income the individual has to determine whether they cross the threshold.
This matters for planning: restructuring ownership shares between spouses (where legally and correctly documented, typically via a Form 17 declaration for unequal splits) can, in some cases, keep one or both partners under the threshold. It’s not a loophole to abuse, and HMRC checks these declarations, but it’s a legitimate factor to review with your accountant if you’re close to the line.
What are the New Quarterly Submission Requirements?
Once mandated, you must:
- Keep digital records of income and expenses using MTD-compatible software (or bridging software linked to a spreadsheet).
- Submit a quarterly update to HMRC summarising income and expenses for each three-month period, aligned to the standard tax year quarters unless you elect calendar-quarter reporting.
- Submit an End of Period Statement (EOPS) for each business, finalising the year’s figures and applying any adjustments or reliefs.
- Submit a Final Declaration by 31 January following the end of the tax year — replacing the old SA100 — confirming your total income across all sources and any other tax due.
If you’re weighing up whether your accounting setup can cope with this, our guide on how to prepare for Making Tax Digital walks through the software options in more detail, and our Making Tax Digital for sole traders guide covers the sole-trader-specific mechanics of quarterly reporting.
Corporation Tax and Limited Company Updates for 2026
Direct answer: Limited companies pay 19% Corporation Tax on profits up to £50,000, 25% on profits above £250,000, and a tapered marginal rate in between — unchanged in structure for 2026/27, but the associated companies and capital allowances detail catches many directors out.
Associated Companies Rules and Marginal Relief Pitfalls
If your company has profits between £50,000 and £250,000, marginal relief tapers your rate up from 19% toward 25%, using a fixed fraction of 3/200. The effective marginal rate on each additional pound of profit in that band is 26.5% — higher than the 25% headline main rate, because you’re also losing relief as profits rise.
Where it gets complicated is associated companies. If you control more than one company — including companies controlled by a spouse or connected person in some circumstances — the £50,000 and £250,000 thresholds are divided equally between them. Two associated companies mean each one only gets a £25,000 small profits threshold and a £125,000 upper threshold, not £50,000 and £250,000 each. Many directors miscalculate this because they forget to count dormant or newly formed companies, or don’t realise a connected person’s separate company counts too. Getting this wrong is one of the most common Corporation Tax filing errors HMRC flags.
| Profits | Rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,001 – £250,000 | Tapered marginal rate, effective 26.5% on profit in this band |
| Above £250,000 | 25% (main rate) |
Thresholds are divided by the number of associated companies plus one.
For a full breakdown of how this affects your specific numbers, see our dedicated Corporation Tax rate UK guide.
Capital Allowances and Full Expensing Adjustments
Full expensing — 100% first-year relief on qualifying plant and machinery — remains available for companies, but the main rate writing-down allowance on assets outside full expensing has been reduced from April 2026, following the Autumn Budget 2025. This lowers the tax relief available on main-pool asset purchases that don’t qualify for full expensing, so it’s worth timing large capital purchases carefully and checking with your adviser whether an asset qualifies for the 100% relief or the reduced writing-down rate.
Changes for Landlords and Property Businesses
Direct answer: Landlords face the same MTD for ITSA threshold and cumulative income rules as sole traders, plus specific complications around jointly owned property and a continuing trend toward incorporating property portfolios ahead of the digital transition.
Section 24 Restructuring Trends ahead of April 2026
Section 24 restrictions on mortgage interest relief for individual landlords have pushed many portfolio landlords toward incorporating into a limited company, where full mortgage interest deduction against profits remains available before Corporation Tax. The arrival of MTD for ITSA has accelerated this trend for landlords near the £50,000 threshold, since a limited company property business isn’t currently subject to MTD for ITSA (it falls under Corporation Tax instead, and MTD for Corporation Tax has been ruled out for now). This isn’t the right move for every landlord — there are Stamp Duty Land Tax and Capital Gains Tax costs on transferring properties into a company — but it’s a live conversation for anyone managing multiple lets.
If you’re comparing structures, our guide on sole trader vs limited company in 2026 sets out the trade-offs in full, and our Capital Gains Tax on business assets guide covers what incorporating a property business can trigger.
National Insurance Contributions (NICs) & Dividend Tax Adjustments
Direct answer: Class 2 NICs no longer apply to the self-employed; Class 4 stays at 6% on profits between £12,570 and £50,270 and 2% above that. The dividend allowance is frozen at £500, but dividend tax rates rose by 2 percentage points from 6 April 2026.
Class 2 and Class 4 NICs: The Simplified Structure
Class 2 NICs were abolished for the self-employed from April 2024, simplifying the old dual-class system. What remains is Class 4, charged at 6% on profits between the £12,570 lower threshold and £50,270 upper threshold, and 2% on profits above that. Voluntary Class 3 contributions, used to fill gaps in your State Pension record, rose to £18.40 a week for 2026/27. For a full walkthrough of what you owe as a sole trader, see our National Insurance for the self-employed guide.
Dividend Allowance Strategy for Directors
The tax-free dividend allowance has stayed at £500 since 2024, well down from £2,000 in 2022/23. From 6 April 2026, the rates charged above that allowance increased: the basic rate rose from 8.75% to 10.75%, and the higher rate rose from 33.75% to 35.75%. The additional rate holds at 39.35%.
This shift narrows — and in some cases reverses — the tax advantage of paying yourself in dividends over taking a salary, particularly for single-director companies without employees to claim the Employment Allowance against. If you’re setting your salary and dividend split for the year, our guide to paying yourself as a limited company director and dividend tax rates for 2026/27 both model this out with worked figures.
HMRC Modernisation and Penalty Reform
Direct answer: Late MTD submissions now trigger a points-based penalty, similar to VAT: miss a deadline and you get a point; hit the points threshold and you’re fined £200, with further £200 fines for each additional late submission after that.
The New Points-Based Penalty System for Late Submissions
Every missed quarterly update or Final Declaration deadline adds a penalty point. VAT points and Income Tax points accrue on separate tracks. Once you reach the relevant points threshold, HMRC issues a £200 penalty, and every further missed deadline after that triggers another £200 fine, with no grace period once you’re in scope. Points do expire, but only after a period of consistent on-time filing, so persistent lateness compounds quickly. This replaces the old system of automatic fixed fines for late Self Assessment, though the separate late-payment penalty regime (interest plus percentage-based penalties on unpaid tax) still applies on top. If you want the detail on how late payment penalties stack against this new points system, see our late Self Assessment penalty guide.
Modernising Tax Code Queries and Digital Services
HMRC has continued shifting routine queries — tax code checks, payment plans, and simple corrections — into its online account and app, reducing phone wait times for genuinely complex cases. If you haven’t set up a Government Gateway account with digital access to your Self Assessment and MTD obligations, this is worth doing before your first quarterly deadline, not after.
Action Plan: How UK Businesses Can Prepare Before April 2026
If you haven’t started preparing yet, here’s a realistic order of operations.
Step 1: Auditing Your Current Accounting System
Check whether your current setup — spreadsheets, paper records, or existing software — can produce a digital record that links directly to MTD-compatible software. Pure paper records and unlinked spreadsheets no longer meet the statutory requirement on their own.
Step 2: Assessing Your Gross Income Across All Streams
Add together every trade and every rental property you run personally, using gross income before expenses, based on your most recent full tax year. If the combined total is at or near £50,000, assume you’re in scope and plan accordingly, even if HMRC hasn’t written to confirm it.
Step 3: Bridging Software and API Integration
If you want to keep using spreadsheets, look for HMRC-recognised bridging software that connects your spreadsheet to HMRC’s API for quarterly submissions. If you’re starting fresh, platforms like Xero, QuickBooks and FreeAgent all offer MTD-compatible packages built for this. Test the workflow with a dummy submission before your first live deadline, and confirm your bookkeeper or accountant has access set up on their end too.
A rough preparation timeline, working backward from 6 April 2026, looks like this: confirm your qualifying income status and register for MTD by late 2025; select and trial your software in Q1 2026; run your first live quarterly submission in the summer of 2026; and file your first EOPS and Final Declaration by January 2028.
Frequently Asked Questions (FAQs)
Who is exempt from MTD for ITSA in 2026? Automatic temporary exemptions apply to people with trust or estate income, certain non-residence or double tax treaty claims, and farmer’s or creative artist’s averaging relief on their 2024/25 tax return. Digitally excluded individuals can apply for exemption separately, and partnerships aren’t yet mandated.
How is the £50,000 threshold calculated for MTD? HMRC adds together your gross income (before expenses) from all self-employment and property businesses you run personally, based on your 2024/25 Self Assessment return, and compares the combined total against £50,000.
What are the penalties for late digital submission under new HMRC rules? A points-based system applies. Each missed deadline adds a point; reaching the threshold triggers a £200 penalty, with further £200 fines for each subsequent late submission.
Does MTD apply to limited companies in 2026? No. MTD for ITSA applies only to individuals — sole traders and landlords — who file Self Assessment. Limited companies report through Corporation Tax, and MTD for Corporation Tax has been ruled out for now.
If you’re still working through the basics of running a Self Assessment return alongside these new rules, our Self Assessment tax return guide and how to do a Self Assessment tax return walkthrough are both worth bookmarking alongside this one.
