The Chancellor held the Spring Statement yesterday. Even before the events in the Middle East it was always likely to have little in the way of tax significance as the government has been keen to have only one tax event per year (the Budget) and so the Spring Statement was intended to provide an interim update on the economy and public finances.
That is what turned out to be the case and there were no changes in tax policy or rate to those already announced.
We have therefore taken this opportunity to summarise the position on the main taxes from 6 April 2027 and where applicable changes which will come into effect from 6 April 2027 where we are currently undertaking significant tax planning for some clients and it may be something that others want to consider too. If so, we would always be happy to hear of your thoughts and intentions to see how we can ensure these are achieved tax efficiently.
Here’s what lies ahead from 6 April
The basic rate band remains at £37,700, with the higher rate threshold remaining at £50,270. The additional rate threshold remains at £125,140. The freeze of these thresholds will continue until April 2031. The NICs Primary Threshold and Lower Profits Limit remain at £12,570. The NICs Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate threshold at £50,270 up to April 2031. Other employer NICs relief thresholds aligned to the Upper Earnings Limit will also be maintained at this level.
As our clients who are Scottish taxpayers know to their cost, the tax on income (other than savings and dividend income) is different for taxpayers who are resident in Scotland from that paid by taxpayers resident elsewhere in the UK. The Scottish Income Tax rates and bands apply to income such as employment income, self-employed trade profits, pensions and property income.
The rates and bands for 2026/27 are as follows:
|
Band £ |
Rate % |
|
0 - 3,967 |
19 |
|
3,968 - 16,956 |
20 |
|
16,957 - 31,092 |
21 |
|
31,093 - 62,430 |
42 |
|
62,431 - 125,140 |
45 |
|
Over 125,140 |
48 |
Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK.
The Income Tax personal allowance is fixed at the current level of £12,570 and will remain frozen until April 2031.
Property income is any income from letting land and buildings.
Individuals have a Property Allowance. This exempts property income of £1,000 or less. Property income over £1,000 can be offset either by the £1,000 Property Allowance or by deducting relevant expenses.
In yet another kick to landlords, the government is introducing the following separate tax rates for property income from 2027/28:
It remains to be seen whether the Scottish and Welsh governments will follow suit by increasing taxes on property income in the future, as the government is devolving that power to those governments.
Savings income is income such as bank and building society interest. These rules apply to the whole of the UK.
The Savings Allowance applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of Income Tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.
The current tax rates on savings income will be maintained for 2026/27 but from 6 April 2027, there will be a 2% increase in tax rates so basic rate will increase to 22%, the higher rate to 42% and the additional rate will increase to 47%.
There is no change to the Dividend Allowance where the first of dividends is chargeable to tax at 0%.
From 6 April 2026, there will though be a 2% increase in the ordinary and upper rates of Income Tax applicable to dividends. The additional rate will remain unchanged at 39.35%.
Dividends received above the Dividend Allowance will be taxed at the following rates for 2026/27:
These rules apply to the whole of the UK.
Comment |
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We are currently reviewing many of our clients dividend positions to see what scope there is to take additional dividends tax efficiently before 5 April 2026. |
For 2026/27:
For 2026/27, the limits are as follows:
These limits will remain frozen until 5 April 2031.
From 6 April 2027, the annual ISA cash limit will be set at £12,000. The remaining £8,000 will be designated for stocks and shares ISA investment. This restriction will not apply for those over the age of 65, where the cash ISA limit will remain at £20,000.
For 2026/27 the rates of Class 1 employee NICs are unchanged at 8% and 2%. The employer rate is 15%.
The Secondary Threshold is the point at which employers become liable to pay NICs on an individual employee’s earnings and is currently set at £5,000 a year for 2026/27. The government has announced that this will be maintained at this level until April 2031.
The Employment Allowance allows eligible businesses with employer NICs bills to deduct £10,500 from their employer NICs bill.
For 2026/27 the rates of Class 4 self-employed NICs are 6% and 2%.
The government has announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from 1 April 2026.
The rates which will apply are as follows:
|
|
NLW |
NMW 18-20 |
NMW 16-17 |
Apprentices |
|
From 1 April 2026 |
£12.71 |
£10.85 |
£8.00 |
£8.00 |
The apprenticeship rate applies to apprentices under 19 or 19 and over in the first year of apprenticeship. The NLW applies to those aged 21 and over.
The rates of tax for company cars are amended for 2026/27:
Benefit in kind increase for company cars for tax years up to and including 2029/30 are confirmed.
The government announced that it is introducing a temporary easement to mitigate the increasing benefit in kind tax liabilities of plug-in hybrid electric vehicle (PHEV) company cars due to new emission standards. The easement will apply retrospectively from 1 January 2025 to 5 April 2028. Transitional arrangements will apply to certain PHEVs until 5 April 2031.
The government will increase the car fuel benefit charge from 6 April 2026 to £29,200.
The government will increase the Van Benefit Charge and the Van Fuel Benefit Charges from 6 April 2026 to £4,170 and £798 respectively.
The government has confirmed that the use of payroll software to report and pay tax on benefits in kind will become mandatory, in phases, from April 2027. This will apply to Income Tax and Class 1A NICs.
The Capital Gains Tax rates remain unchanged and the annual exempt amount will remain at £3,000.
The rate applying for individuals claiming Business Asset Disposal Relief and Investors’ Relief will increase to 18% for disposals made on or after 6 April 2026.
The nil rate band has been frozen at £325,000 since 2009 and will continue to be frozen until 5 April 2031. An additional nil rate band, called the ‘residence nil rate band’ is also frozen until 5 April 2031 at the current £175,000 level, as is the residence nil rate band taper starting at £2 million.
The government will bring unused pension funds and death benefits payable from a pension into a person’s estate for Inheritance Tax (IHT) purposes from 6 April 2027.
The personal representatives will be responsible for paying any IHT due on unused pension funds and death benefits in a person’s estate. However, pension beneficiaries of registered pension schemes will be able to request the pension scheme administrator pay their IHT liability directly to HMRC in specific circumstances. They may also direct scheme administrators to withhold 50% of taxable benefits for up to 15 months.
Comment |
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The rules may potentially have significant effects for those with pension funds. For example, someone with a pension fund at the date of his death valued at £400,000. The remainder of his estate is valued at £1,000,000. Currently, the IHT bill is £270,000. This will rise to £430,000 under the new rules. Income tax will also be applied on payments of the net pension fund to beneficiaries. |
From 6 April 2026, agricultural and business property will continue to benefit from the 100% IHT relief up to a limit of £2.5 million. This has increased from the initial £1 million limit following an announcement sneaked out just prior to Christmas. The limit is a combined limit for both agricultural and business property. Such property in excess of the limit will benefit from a 50% relief.
The £2.5 million limit applies per person and is refreshed every seven years. From 6 April 2026, this allowance will be transferable between married couples or civil partners. This will include where the first death was before 6 April 2026.
There may be a further £2.5 million allowance for trusts in certain situations, but the rules are complex.
The £2.5 million limits for both individuals and trusts will be frozen until 6 April 2031.
Comment |
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There has been a great deal of press coverage reflecting the unhappiness of farmers with these changes. However, the changes are much broader and potentially affect the owners of many SMEs in the UK. Early IHT planning becomes critical under the new rules. |
The government has confirmed that the rates of Corporation Tax will remain unchanged, which means that, from 1 April 2026, the rate will stay at 25% for companies with profits over £250,000. The 19% small profits rate will be payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective Corporation Tax rate.
The penalty for taxpayers submitting a Corporation Tax return late will double for returns for which the filing date is on or after 1 April 2026.
The main rates of Writing Down Allowance (WDA) are reducing from 18% to 14% per year from 1 April 2026 for Corporation Tax purposes and 6 April 2026 for Income Tax purposes. For businesses with chargeable periods which span 1 April (Corporation Tax) or 6 April (Income Tax), a hybrid rate will apply. The WDA on the special rate pool remains at 6% per year.
For expenditure incurred on or after 1 January 2026, the government will introduce a new first year allowance (FYA) of 40% for all businesses on main rate assets, including most expenditure on assets for leasing. Cars, second-hand assets and assets for leasing overseas will not be eligible.
The Annual Investment Allowance is available to both incorporated and unincorporated businesses. It gives a 100% write-off on certain types of plant and machinery up to certain financial limits per 12-month period. The limit remains at £1 million.
The 100% FYA for qualifying expenditure on zero-emission cars and the 100% FYA for qualifying expenditure on plant or machinery for electric vehicle chargepoints have been extended to 31 March 2027 for Corporation Tax purposes and 5 April 2027 for Income Tax purposes.
Significant changes to the limits applying to the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) from 6 April 2026. The gross assets requirement that a company must not exceed for EIS and VCTs will increase from £15 million to £30 million immediately before the issue of the shares, and from £16 million to £35 million immediately after the issue. The annual investment limit that companies can raise will increase from £5 million to £10 million. For Knowledge-Intensive Companies (KICs), the annual investment limit will increase from £10 million to £20 million. The company’s lifetime investment limit will increase to £24 million and for KICs to £40 million. The Income Tax relief that can be claimed by an individual investing in VCTs will decrease from 30% to 20%.
Certain limits relating to the Enterprise Management Incentives (EMI) scheme are changing. For EMI contracts granted on or after 6 April 2026, the employee limit will increase from 250 employees to 500 the gross assets test will be increased from £30 million to £120 million, and the company share option limit will be increased from £3 million to £6 million. The limit on the exercise period will increase to 15 years, and will also apply retrospectively to existing EMI contracts not already expired or exercised.
