UK businesses have entered a new tax year with changes affecting payroll, property costs, investment, profit extraction and tax reporting. While Corporation Tax itself has not increased in 2026, employers and business owners are dealing with a wider set of changes that can alter operating costs and compliance requirements.
The biggest developments include the continued 15% employer National Insurance rate, the 2026 business rates revaluation, new capital allowances, higher dividend tax rates and the start of Making Tax Digital for higher-income sole traders and landlords.
At the same time, the Government has continued work on further tax reform through Tax Update 2026 and draft Finance Bill 2026/27 legislation.
Table of Contents
- Key facts
- What are the main UK business tax changes in 2026?
- Corporation Tax in 2026
- Employer National Insurance
- Business rates changes
- Capital allowances and business investment
- Making Tax Digital
- Dividend tax changes
- National Living Wage and employer costs
- VAT and tax administration
- What changed during 2026?
- Who is most affected?
- What businesses should do now
- Future outlook
- Key takeaways
- FAQs
- Conclusion
Key Facts
- The main Corporation Tax rate remains 25% for companies with profits above £250,000.
- The small-profits Corporation Tax rate remains 19% for profits below £50,000.
- Employer National Insurance remains 15% in 2026/27.
- The employer National Insurance secondary threshold remains £5,000 a year.
- Eligible employers can claim up to £10,500 through the Employment Allowance.
- Business rates in England were revalued from 1 April 2026.
- A new 40% first-year capital allowance applies to qualifying main-rate plant and machinery expenditure from 1 January 2026.
- The main-rate writing-down allowance fell to 14% from April 2026.
- The National Living Wage increased to £12.71 an hour for workers aged 21 and over.
- Dividend tax rates increased from 6 April 2026.
- Making Tax Digital for Income Tax began on 6 April 2026 for qualifying sole traders and landlords with income above £50,000.
What are the main UK business tax changes in 2026?
The 2026/27 tax year does not bring a single new business tax. Instead, companies and entrepreneurs are dealing with a collection of changes introduced at different points during the year.
The most important areas are:
| Area | 2026 position | Main impact |
|---|---|---|
| Corporation Tax | 19% / 25% rates remain | Company profits |
| Employer National Insurance | 15% | Payroll costs |
| Employment Allowance | Up to £10,500 | Reduces eligible employer NIC |
| Business rates | New 2026/27 multipliers | Commercial property costs |
| Capital allowances | New 40% first-year allowance | Investment |
| National Living Wage | £12.71 for age 21+ | Wage costs |
| Dividend tax | 10.75% / 35.75% / 39.35% | Directors and shareholders |
| Making Tax Digital | Started for qualifying taxpayers | Compliance and reporting |
Corporation Tax in 2026
Corporation Tax remains broadly unchanged in headline rate terms.
For Corporation Tax years beginning in 2026:
- companies with profits below £50,000 generally pay the 19% small-profits rate;
- companies with profits above £250,000 generally pay the 25% main rate;
- companies with profits between those thresholds may qualify for Marginal Relief.
The thresholds can be reduced where a company has associated companies or a short accounting period.
This means businesses should not assume that every company automatically pays 25% of its taxable profits.
What does this mean for businesses?
The more significant planning issue is often how a company manages its taxable profits, investments, allowable deductions and the way profits are extracted by shareholders.
Businesses making substantial capital investments should also consider the capital allowances available during 2026/27.
Employer National Insurance remains a major cost
Employers continue to pay a 15% rate of Class 1 secondary National Insurance on relevant employee earnings above the applicable threshold.
The secondary threshold remains £5,000 a year for 2026/27.
The Employment Allowance, however, can reduce the National Insurance liability of eligible employers by up to £10,500.
The change is particularly significant for businesses with large numbers of employees because employer NIC is an additional employment cost on top of wages.
For smaller employers, the Employment Allowance can materially reduce that burden.
Business rates changed from April 2026
One of the biggest changes facing businesses with commercial premises is the 2026 business rates revaluation.
In England, new rateable values took effect from 1 April 2026.
The 2026/27 multipliers include:
| Property/business type | 2026/27 multiplier |
|---|---|
| Small business, non-RHL, RV below £51,000 | 43.2p |
| Standard non-RHL, RV £51,000–£499,999 | 48p |
| RHL, RV below £51,000 | 38.2p |
| RHL, RV £51,000–£499,999 | 43p |
| High-value properties, RV £500,000+ | 50.8p |
RHL means qualifying retail, hospitality and leisure properties.
The Government introduced permanently lower RHL multipliers for qualifying properties below £500,000 rateable value.
There is also transitional and other support for businesses facing large increases following the revaluation.
Who needs to pay particular attention?
Businesses operating:
- shops;
- restaurants;
- cafés;
- pubs;
- hotels;
- leisure facilities;
- offices;
- warehouses;
- other commercial premises.
Business rates are devolved, so businesses in Scotland, Wales and Northern Ireland should check their respective national systems rather than applying England’s multipliers automatically.
Capital allowances changed in 2026
Businesses investing in equipment and machinery have another important tax-planning consideration.
A new 40% first-year allowance for qualifying main-rate plant and machinery expenditure took effect from 1 January 2026.
The Government introduced the measure to provide additional upfront tax relief for investment.
At the same time, the main-rate writing-down allowance was reduced from 18% to 14% from April 2026.
The special-rate writing-down allowance remains 6%.
The £1 million Annual Investment Allowance also remains available for qualifying expenditure.
Why does this matter?
Capital allowances can affect when a business receives tax relief for investment.
A business considering new machinery, equipment or other qualifying assets should therefore examine the interaction between:
- the Annual Investment Allowance;
- full expensing where available;
- first-year allowances;
- writing-down allowances.
The correct treatment depends on the asset, business structure and date of expenditure.
Making Tax Digital is now a reality for many sole traders
Making Tax Digital for Income Tax became mandatory from 6 April 2026 for eligible sole traders and landlords with qualifying income above £50,000.
The system requires affected taxpayers to:
- keep digital records;
- use compatible software;
- send quarterly updates to HMRC;
- submit the relevant annual information; and
- pay tax by the normal deadline.
The rollout is being phased.
Those with qualifying income above £50,000 entered the system from April 2026.
The threshold falls to more than £30,000 from April 2027 and more than £20,000 from April 2028.
HMRC began signing up people who need to use the system for 2026/27 during September 2026.
For affected businesses, this is not simply a tax-rate change. It is a change to the way financial information must be recorded and reported.
Dividend tax rates increased in April
Company directors and shareholders who receive dividends also face higher ordinary and upper dividend tax rates in 2026/27.
The rates from 6 April 2026 are:
| Tax band | Dividend tax rate |
|---|---|
| Basic rate | 10.75% |
| Higher rate | 35.75% |
| Additional rate | 39.35% |
The additional rate remains unchanged.
The dividend allowance remains £500.
This means owner-managed companies may need to review how profits are extracted through salary, dividends or retained profits.
Tax planning should take account of the individual’s wider income and circumstances rather than looking at dividend tax in isolation.
The National Living Wage also increased
Although the National Living Wage is not a tax, the April 2026 increase directly affects business costs.
From 1 April 2026, the rate for workers aged 21 and over rose to £12.71 an hour.
The rates for younger workers and apprentices also increased.
For labour-intensive businesses, the combination of higher wage costs and employer National Insurance can have a noticeable effect on payroll budgets.
Retail, hospitality, care, leisure and other sectors with large numbers of lower-paid workers may be particularly exposed.
VAT and tax administration are also changing
The Government’s Tax Update 2026 introduced a range of measures aimed at simplifying and modernising the tax system.
These include work on:
- VAT administration;
- customs;
- online marketplace compliance;
- PAYE;
- tax debts;
- distributions;
- National Insurance;
- VAT treatment of land.
The Government also plans to introduce digital channels for option-to-tax notifications and revocations before the end of 2026.
For businesses, the broader direction is clear: HMRC is moving towards a more digital tax administration system.
What changed during 2026?
The timing of each change matters.
1 January 2026
A new 40% first-year allowance for qualifying main-rate plant and machinery expenditure took effect.
1 April 2026
The new National Minimum Wage and National Living Wage rates came into force.
Business rates in England were also updated following the 2026 revaluation.
6 April 2026
The new tax year began.
The new dividend rates took effect.
The main-rate capital allowance writing-down rate changed.
Making Tax Digital became mandatory for the first group of affected sole traders and landlords.
June 2026
The Government published Tax Update 2026, setting out further reforms, consultations and administrative changes.
July 2026
Draft Finance Bill 2026/27 legislation was published.
September 2026
HMRC is beginning to sign up taxpayers who need to use Making Tax Digital for Income Tax for 2026/27.
Who is most affected by the 2026 changes?
Small businesses
Small businesses should pay particular attention to employer National Insurance, business rates, payroll and the Employment Allowance.
Limited companies
Company directors should review Corporation Tax, capital allowances and dividend extraction.
Sole traders
The biggest compliance change is Making Tax Digital for those above the relevant income threshold.
Landlords
Landlords with qualifying property income are also entering the Making Tax Digital regime if they meet the relevant threshold.
Retail and hospitality businesses
These businesses need to examine their new business rates position following the 2026 revaluation.
Businesses making major investments
Companies investing in plant and machinery should review the new capital allowance structure before making major investment decisions.
Why does this matter to UK businesses?
The most important point is that the 2026 tax environment cannot be understood by looking at Corporation Tax alone.
A company might face:
- unchanged Corporation Tax rates;
- higher employment costs;
- different business rates;
- new investment allowances;
- higher dividend taxation for owners;
- additional digital reporting requirements.
The combined effect can be more important than any individual tax rate.
For business owners, the practical question is therefore not simply “Is tax going up?”
It is:
Which parts of the tax system affect my business, and what do I need to change because of them?
What should businesses do now?
Businesses should review their position before the next major tax-planning deadline.
A practical checklist includes:
- Check the 2026/27 Corporation Tax position.
- Review payroll costs after employer NIC and minimum-wage changes.
- Confirm whether the business can claim Employment Allowance.
- Check the property’s new business rates bill.
- Review capital expenditure plans.
- Check eligibility for capital allowances.
- Review dividend extraction strategies.
- Determine whether Making Tax Digital applies.
- Confirm that accounting software is compatible where required.
- Monitor HMRC’s Tax Update 2026 developments.
- Distinguish confirmed legislation from consultations and proposals.
Businesses should seek professional tax advice where decisions involve significant sums or complex circumstances.
Expert Analysis
The direction of UK tax policy in 2026 is broader than simply changing tax rates.
The Government is simultaneously trying to support investment, modernise tax administration and increase compliance.
For businesses, that creates two different challenges.
The first is cost management. Employers have to account for payroll costs, business rates and other operating expenses.
The second is compliance modernisation. Making Tax Digital and HMRC’s wider digital reforms mean businesses increasingly need accurate digital financial records.
The result is a tax system that is becoming more data-driven.
That could make compliance easier over time, but businesses that continue relying heavily on manual processes may face a growing administrative burden.
Future Outlook
The 2026 tax year is unlikely to be the end of the reform programme.
Tax Update 2026 and the draft Finance Bill 2026/27 legislation show that the Government is continuing to work on corporate tax, indirect tax, customs and tax administration.
Businesses should therefore avoid treating the rules announced in April as the complete 2026 picture.
Further legislation, consultations and implementation guidance may affect specific sectors and business structures.
The safest approach is to distinguish between:
Rules already in force
and
proposals that are still being consulted on or legislated.
That distinction will become increasingly important as HMRC and the Treasury modernise the tax system.
Key Takeaways
- Corporation Tax remains at 19% for qualifying small profits and 25% at the main rate.
- Employer National Insurance remains 15%.
- Eligible employers can claim up to £10,500 through Employment Allowance.
- England’s business rates system changed following the April 2026 revaluation.
- Qualifying retail, hospitality and leisure properties can benefit from lower RHL multipliers.
- A new 40% first-year allowance supports qualifying investment.
- The main-rate writing-down allowance fell to 14%.
- The National Living Wage is £12.71 for workers aged 21 and over.
- Dividend tax rates increased from April 2026.
- Making Tax Digital is now mandatory for the first group of affected sole traders and landlords.
- Further tax reforms are being developed during 2026.
Frequently Asked Questions
What are the main UK business tax changes in 2026?
The major changes include business rates revaluation, capital allowance changes, continued higher employer National Insurance costs, increased dividend tax rates and the introduction of Making Tax Digital for qualifying sole traders and landlords.
Has Corporation Tax increased in 2026?
No. The main Corporation Tax rate remains 25%, while the small-profits rate remains 19%, subject to the relevant thresholds and rules.
What is the UK Corporation Tax rate in 2026?
Companies with profits above £250,000 generally pay the 25% main rate. Companies with profits below £50,000 generally qualify for the 19% small-profits rate, with Marginal Relief potentially applying between the thresholds.
What is the employer National Insurance rate in 2026?
The standard employer Class 1 National Insurance rate is 15% for 2026/27, with the relevant secondary threshold at £5,000 a year.
What is the National Living Wage in 2026?
The National Living Wage for workers aged 21 and over is £12.71 an hour from 1 April 2026.
Who needs to use Making Tax Digital in 2026?
From 6 April 2026, eligible sole traders and landlords with qualifying income above £50,000 must use Making Tax Digital for Income Tax, subject to exemptions.
Did business rates change in 2026?
Yes. England introduced new rateable values and business rates multipliers from 1 April 2026 following the latest revaluation.
Did dividend tax increase in 2026?
Yes. From 6 April 2026, the ordinary dividend tax rate increased to 10.75% and the upper rate to 35.75%. The additional rate remains 39.35%.
What changed for business investment in 2026?
A new 40% first-year allowance for qualifying main-rate plant and machinery expenditure took effect from 1 January 2026. The main-rate writing-down allowance subsequently reduced to 14%.
Are all UK businesses affected by the same business rates rules?
No. Business rates are devolved. The 2026/27 multiplier structure discussed in this article applies to England, while businesses in Scotland, Wales and Northern Ireland should check the rules applicable in their respective nations.
Conclusion
The UK’s 2026 tax changes are less about one dramatic increase in Corporation Tax and more about a series of changes affecting the cost of employing people, operating commercial premises, investing in equipment, extracting company profits and meeting tax-reporting obligations.
For many businesses, the biggest practical change is not a new tax rate at all. It is the growing requirement to maintain accurate digital records and interact with HMRC through increasingly digital systems.
Business owners should therefore look beyond the headline Corporation Tax rate and review the complete 2026/27 picture — including payroll, business rates, investment allowances, dividends and Making Tax Digital.
With further tax legislation and consultations still developing, keeping track of confirmed changes separately from proposals will remain essential throughout the rest of 2026.