The Self-Employed Checklist for the New Tax Year
April marks the start of a new tax year, and 2026/27 brings added significance with the commencement of Making Tax Digital (MTD) for Income Tax for many clients. Alongside MTD, there are several key tax changes to factor into your planning and client conversations.Article by Coconut
To support your advisory approach, here’s a practical checklist to guide your clients through the year ahead.
Review dividend strategies
Many owner-managed businesses continue to extract profits via dividends. From April 2026, dividend tax rates increase across most bands:
| Tax Band | 2025/26 Rate | 2026/27 Rate |
| Basic Rate | 8.75% | 10.75% |
| Higher Rate | 33.75% | 35.75% |
| Additional Rate | 39.35% | 39.35% (unchanged) |
The Dividend Allowance remains at £500. While unchanged, the rate increases mean a higher overall tax burden, particularly for basic and higher rate taxpayers. This is a good opportunity to revisit remuneration strategies with affected clients.
Reassess capital gains and exit planning
For clients considering disposals, there are two key points to highlight:
- The Capital Gains Tax Annual Exempt Amount remains at £3,000.
- Business Asset Disposal Relief (BADR) increases from 14% to 18% from April 2026, as part of a phased rise.
These changes may impact the timing and structure of disposals, so it’s worth incorporating into any forward-looking exit or succession planning discussions.
Factor in fiscal drag
While headline Income Tax rates remain unchanged, thresholds are frozen until 2030. The Personal Allowance stays at £12,570, with tapering beginning at £100,000.
As a result, clients may be pulled into higher tax bands over time as income rises with inflation. Proactive tax planning and regular income reviews will be key to managing this “fiscal drag” effect.
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Prepare clients for Making Tax Digital
Clients with qualifying income over £50,000 in the 2024/25 tax year will now fall within the scope of MTD for Income Tax.
This means:
- Maintaining digital records using MTD-compatible software
- Submitting quarterly updates to HMRC
Clients below the threshold are not yet mandated but should monitor their 2025/26 income in preparation for future inclusion.
It’s also important to manage expectations during this transitional period. By 31 January 2027, clients will still need to submit a Self Assessment tax return for 2025/26, effectively running parallel reporting systems—MTD for the current year and Self Assessment for the prior year.
Plan ahead for expanding MTD thresholds
MTD is set to extend further:
- From April 2027: threshold reduces to £30,000
- From April 2028: expected to reduce to £20,000
For clients likely to fall within these thresholds, now is the time to encourage early adoption of digital processes such as capturing receipts digitally and integrating bank feeds. Early behavioural change will ease the transition and reduce future compliance pressure.
Supporting clients through transition
2026/27 represents a bridge between traditional Self Assessment and a fully digital tax system. By proactively guiding clients through these changes, you can ensure compliance while also strengthening your advisory role.
Positioning these updates as part of a wider financial health check can also help clients better understand their tax position and make more informed business decisions.
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