UK Tax Law Updates Coming in 2026

What You Need to Know

Introduction

As the UK tax system continues to evolve, 2026 is shaping up to be a landmark year for several major reforms. From digital reporting to inheritance tax changes, these updates will affect businesses, individuals, and property owners. Staying ahead of these shifts will be crucial to tax planning, compliance, and risk management.

Key UK Tax Law Changes Taking Effect in 2026

Here are the most important tax law updates to watch in the UK for 2026

1. Making Tax Digital (MTD) for Income Tax (ITSA)

From 6 April 2026, self-employed individuals and landlords with qualifying income over £50,000 will be required to use Making Tax Digital for Income Tax Self-Assessment (MTD ITSA). GOV.UK
The requirement means: keeping digital records and submitting quarterly updates to HMRC using MTD-compatible software. GOV.UK
For those with income between £30,000 and £50,000, the MTD mandate will start later, from April 2027. GOV.UK
The phased roll-out gives some time, but businesses should start evaluating software and processes now.

Implication: This is a big shift from annual self-assessment reporting to more continuous tax reporting. It places more burden on record keeping, but also gives greater visibility into tax liabilities throughout the year.

2. Inheritance Tax (IHT) Relief Reforms

From 6 April 2026, reforms to Business Property Relief (BPR) and Agricultural Property Relief (APR) come into effect. GOV.UK+1
Key change: The 100% relief will be capped at £1 million of combined qualifying business + agricultural property. Above £1 m, the relief will drop to 50%, effectively meaning a 20% IHT rate on the excess. GOV.UK+2BKL+2
For trusts, there will be a £1m allowance for 100% relief per 10-year anniversary charge and exit charge. GOV.UK
Importantly, the £1 m allowance won’t be transferable between spouses. Forvis Mazars+1
There’s also a payment option: IHT on qualifying assets can be paid in equal annual instalments over 10 years, interest-free. GOV.UK

Implication: These reforms make IHT planning more complex, especially for family businesses, farms, and trusts. Large business or agricultural estates may face significantly higher IHT bills unless structured carefully.

3. Non-Domiciled (Non-Dom) Regime Changes (After 2025)

While many of the non-dom changes kicked in earlier (from April 2025), their full impacts carry into 2026 and beyond:

The remittance basis for non-doms was abolished from 6 April 2025, replaced with a residence-based system. GOV.UK+2DLA Piper+2
A Temporary Repatriation Facility (TRF) allows some pre-2025 overseas income/gains to be remitted at a reduced tax rate for a limited time (through tax year 2026-27). GOV.UK
From tax year 2026-27 onwards, individuals under the foreign income and gains (FIG) regime may be taxed on all worldwide income in the standard way. GOV.UK

Implication: For previously non-dom individuals or returning UK residents, the window to benefit from transitional regimes is narrowing. Strategic tax planning is more essential than ever.

4. Capital Gains Tax (CGT) – Business Asset Disposal Relief / Carried Interest

The Business Asset Disposal Relief (BADR) (formerly Entrepreneurs’ Relief) tax rate increases from 14% to 18% from 6 April 2026. ICAEW
For carried interest, from 6 April 2026 it will be taxed under the income tax framework, not CGT. A “multiplier” of 72.5% will apply to “qualifying carried interest,” so the effective rate (income tax + NIC) may exceed 34%. Taxscape

Implication: Entrepreneurs and private equity professionals need to re-evaluate exit strategies and carried interest arrangements. Tax-efficient exits may be more limited.

5. Vaping Products Excise Duty

A Vaping Products Duty (VPD) will be introduced from 1 October 2026. 2Firsts
The duty is a flat rate of £2.20 per 10 ml of vaping liquid. 2Firsts
In addition, a duty stamp scheme will require vaping products to carry duty stamps; manufacturers, importers, etc., must register starting 1 April 2026. 2Firsts
From April 2027, all vaping products sold must carry the required stamps, and unstamped products will be prohibited. 2Firsts

Implication: This is a major change for businesses in the vaping supply chain. Importers, manufacturers and retailers need to register, budget for duty, and comply with packaging and labeling requirements.

Risks, Challenges, and Planning Considerations

Here are some of the key risks and planning questions arising from the 2026 tax reforms:

Cash-flow pressure: With MTD quarterly reporting, businesses may see more frequent tax liabilities, requiring better cash-flow management.
IHT planning complexity: The cap on BPR/APR relief could force wealthy individuals and business owners to rethink succession and estate planning.
Transitional risks for non-doms: Missing the TRF window or not electing the FIG regime could lead to higher taxation.
Valuation risk: Business property and agricultural property need careful valuation to maximize relief under the new IHT regime.
Compliance burden: Vape businesses must make sure they register, stamp, and report correctly; failure can lead to penalties.

Recommendations: What You Should Do Now

Get your accounting systems ready
- If you’re a sole trader, landlord, or small business, evaluate MTD-compatible software now.
- Train your finance team on quarterly reporting and digital record-keeping.
Review estate plans
- If you own significant business or agricultural assets, run IHT projections under the new rules.
- Consider whether trusts or lifetime gifts make sense given the £1m BPR/APR cap.
Non-dom or returning resident?
- Talk to an international tax advisor about electing FIG and using the TRF.
- Evaluate whether your current trust structures remain optimal under the new regime.
Plan for carried interest and disposals
- If you’re in private equity or a fund environment, model how the new income tax treatment affects your exit.
- Consider timing disposals before April 2026 if it provides a tax benefit (depending on your situation).
Vape business readiness
- If you’re in vaping manufacturing or import, register for the duty scheme from April 2026.
- Prepare for duty stamps, packaging, and inventory management changes.

Conclusion

The 2026 tax reforms in the UK are both wide-ranging and impactful. From the shift to digital tax reporting to major inheritance tax relief changes, these updates will affect a broad cross-section of taxpayers. Getting ahead now through planning, system upgrades, and professional advice can help you navigate the changes efficiently and minimize negative impact.