New Tax Year 2026/27: Everything Changing From April

New Tax Year, New Rules

April 6 marks the start of the 2026/27 tax year — and there's quite a lot changing this time around. State pension goes up, working-age benefits rise, the two-child benefit cap is finally scrapped, and frozen tax thresholds keep dragging more earners into higher bands.

Some of it puts more money in your pocket. Some of it quietly takes it away. Here's what's actually happening.

State Pension Goes Up

The full new State Pension rises to £241.30 per week — roughly £12,548 per year. That's up from £230.25 in 2025/26, a 4.8% increase thanks to the triple lock, which guarantees the State Pension rises each April by the highest of average earnings growth, CPI inflation, or 2.5%.

For anyone already drawing their pension, that's a decent bump. For everyone else still working toward retirement, it's a reminder that the State Pension is one of the most dependable bits of income you'll ever have — inflation-linked, guaranteed, and completely immune to whatever the markets are doing.

If you've got gaps in your National Insurance record, buying missing years is still one of the best financial decisions going. You can check your record at gov.uk.

Benefits Rise With Inflation

Working-age benefits — Universal Credit, Personal Independence Payment, Carer's Allowance — all go up in line with the September 2025 CPI figure. The annual uprating is meant to keep support payments roughly in step with the cost of living, though whether it actually keeps pace with what things feel like they cost is debatable.

For anyone who relies on benefits as part of their income, the uplift matters. But the next change is the one that'll make the biggest difference for families.

The Two-Child Cap Is Scrapped

This is the big one for a lot of households. The two-child limit on Universal Credit and Child Tax Credit — which meant families only received support for their first two children — is gone from April 2026.

The cap has been in place since 2017 and has affected hundreds of thousands of families. Getting rid of it means eligible families with three or more children will now receive an extra £3,647 per year for each additional child (that's the Universal Credit child element of £303.94 a month).

For a family with four children who were previously capped, that's an extra £7,294 a year coming into the household. For lower-income families in particular, that's a genuinely significant amount of money.

Frozen Thresholds: The Stealth Tax Rolls On

While benefits go up, income tax thresholds stay exactly where they are — and this is where the government takes back with one hand what it gives with the other.

The personal allowance is still £12,570. The higher-rate threshold is still £50,270. They've been frozen since 2021, and every year that passes with even modest wage growth pushes more people into higher tax bands.

It's called fiscal drag, and the effect is compounding:

• More basic-rate taxpayers are tipping into the higher-rate band just through normal pay rises
• More people are paying income tax for the first time as wages creep past the frozen personal allowance
• Your effective tax rate goes up every year without any headline rate change

By 2026/27, an estimated two million more people are paying 40% tax than when the freeze began. If your salary has gone up at all since 2021, you're almost certainly paying a higher effective rate — even if nothing on your payslip looks obviously different.

National Insurance: Businesses Take the Hit

Rachel Reeves' decision to raise employer National Insurance to 15% and drop the threshold to £5,000 — announced in her October 2024 Budget — is now hitting businesses in earnest as they absorb a full year of the higher rate.

It's technically an employer cost, but it doesn't stay there. Businesses pass it on — through higher prices, slower wage growth, less hiring, or smaller pension contributions. That's the real risk here: if enough companies push up prices to cover the extra NI bill, it feeds straight into inflation, undoing the wage gains that workers are supposed to be feeling. If your employer has been tight with pay rises lately, this is likely part of the reason.

Capital Gains Tax: Higher Rates Are Here to Stay

The Capital Gains Tax changes from October 2024 are now fully bedded in. The lower rate is 18% (up from 10%) and the higher rate is 24% (up from 20%) for most assets. The annual exempt amount sits at just £3,000 — a far cry from the £12,300 it was only three years ago.

If you hold investments outside of an ISA or pension, this makes tax-efficient wrappers more important than they've ever been. Every pound inside an ISA or pension sidesteps these rates completely.

ISA and Pension Allowances Stay Put

A bit of stability amongst all the change:

The ISA allowance hasn't budged in years and inflation keeps chipping away at its real value. But it's still one of the most effective tax shelters available — especially now that CGT rates have gone up.

What Does It All Mean for You?

None of these changes exist on their own. They interact — and how they interact depends entirely on your circumstances.

A retiree benefits from the higher State Pension but might be paying more tax on investment gains. A family with three kids gets a meaningful boost from the cap being scrapped. A higher earner watches fiscal drag push more of their income into the 40% band while their employer absorbs a bigger NI bill.

The point isn't to react to any one change. It's to look at the whole picture — your income, your tax position, your benefits, your pension, your investments — and understand what the new rules actually mean for your situation.

See What It Means for Your Numbers

In Scenarios, you can build a plan that accounts for all of this. State pension income, tax thresholds, investment returns, drawdown strategies — the simulation engine runs 1,000 scenarios across different market conditions so you can see how your plan holds up under the rules you'll actually be living under.

Don't just read about the changes. See what they mean for your numbers.