The new tax year is here, and with it come some changes that could affect small businesses and the self-employed. From 6 April 2026, there are updates to thresholds, allowances, and rules that every small business owner should know about.
Here’s a simple, straightforward round-up of the key changes for 2026/27.
1. ISA Allowance Remains £20,000
For 2026/27, the overall ISA allowance stays at £20,000, and there is no separate limit on Cash ISAs this tax year.
This means you can continue to put the full £20,000 into a Cash ISA if you wish.
Note: Changes to limit Cash ISA contributions (to £12,000 for under-65s) don’t come into effect until April 2027.
For small business owners, this can still be a tax-efficient way to save surplus profits or plan ahead for future tax bills.
2. Employment Allowance Continues
The Employment Allowance, which reduces employer National Insurance (NI) bills, continues in 2026/27 at £10,500 per year.
If your business qualifies, this allowance can offset much of your employer NI contribution, helping reduce payroll costs.
3. National Minimum and Living Wage Increases
From April 2026, the National Minimum and Living Wage rates will rise:
- Workers aged 21 and over: £12.71 per hour
- 18–20-year-olds: £10.85 per hour
- 16–17-year-olds: £8 per hour
- Apprentices: £8 per hour
If you employ staff, you’ll need to update contracts, payroll, and budgets to reflect these changes.
4. National Insurance Thresholds
Key National Insurance thresholds for 2026/27 are:
- Lower Earnings Limit (LEL): £6,708 per year
- Primary Threshold (employees): £12,570 per year
- Secondary Threshold (employers): £5,000 per year
- Small Profits Threshold (self-employed): £7,105 per year
If a sole trader’s profits exceed the Small Profits Threshold, they receive a National Insurance credit. This counts towards entitlement to the State Pension and certain contributory benefits, even if no National Insurance contributions are actually paid.
5. Statutory Pay Updates
Statutory payments to employees also increase in 2026/27:
- Statutory Sick Pay (SSP): £123.25 per week
- Statutory Maternity, Paternity, Adoption, and Shared Parental Pay: £194.32 per week
Ensure your payroll system reflects these new rates to stay compliant.
6. Income Tax Allowances & Thresholds
For 2026/27, income tax thresholds remain largely frozen:
- Personal Allowance: £12,570 (tax free)
- Basic rate (20%): £12,571 to £50,270
- Higher rate (40%): £50,271 to £125,140
- Additional rate (45%): Above £125,140
This means that over time, many taxpayers may move into higher tax bands due to “fiscal drag.” Small business owners and directors should keep this in mind when planning salaries, dividends, and other tax-efficient strategies.
7. Making Tax Digital (MTD) Progress
MTD for Income Tax continues to roll out. By April 2026, self-employed individuals and landlords earning over £50,000 must:
- Keep digital records
- Submit quarterly updates to HMRC using compatible software
Even if your earnings are below the threshold, it’s a good time to ensure your accounting system is digital-ready.
The 2026/27 tax year brings a mix of opportunities and responsibilities for small businesses:
- Good news: Employment Allowance continues, and the full £20,000 ISA allowance is still available.
- Pay attention: National Minimum Wage, statutory pay rates, and frozen income tax thresholds could affect payroll and planning.
Staying on top of these changes will help you manage cash flow, make the most of available allowances, and plan effectively for the year ahead.
If you’re unsure how these changes affect your business, get in touch – we’re here to help.
