As we move further into the 2026/27 tax year, business owners and employees are now seeing the impact of several changes introduced in April.
Below is a summary of some of the key updates that may affect you and your business.
National Minimum Wage Increases
The National Minimum Wage and National Living Wage rates increased from April 2026, (now £12.71 per hour for those aged 21 and over). Employers should ensure payroll systems have been updated and that all eligible employees are receiving the correct rate.
Changes to Statutory Sick Pay (SSP)
One of the most significant employment-related changes this year is the reform of Statutory Sick Pay.
SSP is now available from the first day of sickness absence, removing the previous 3 day waiting period. Eligibility rules have also been widened, allowing more lower-paid workers to qualify for support.
For employers, this may result in increased SSP costs and highlights the importance of maintaining accurate absence records and payroll procedures.
Dividend Tax Changes
Business owners and company directors who receive income through dividends should be aware of the increased dividend tax rates now in effect. The basic and higher rate of dividend tax increased by 2% from April whilst the additional rate remained unchanged. Current rates are now:
Basic rate: 10.75%
Higher rate: 35.75%
Additional rate: 39.35%
Combined with the significantly reduced dividend allowance introduced in previous years, the overall tax burden on dividend income continues to increase.
Those who take a combination of salary and dividends may wish to review their remuneration strategy to ensure it remains tax efficient.
Income Tax Thresholds Remain Frozen
While there have been no changes to the main Income Tax rates, the Personal Allowance and tax thresholds remain frozen.
As salaries continue to rise, more individuals may find themselves paying tax at higher rates without any change to the underlying thresholds
Mileage Allowances
HMRC’s approved mileage allowance rates remain an important consideration for businesses reimbursing employees who use their own vehicles for work journeys.
The existing rates (backdated to 1st April) are now 55p per mile for the first 10,000 miles and 25p per mile after this (up from 45p pm)
Employers should ensure mileage claims are correctly recorded and reimbursed using the appropriate rates to avoid unnecessary tax complications.
Summer VAT Reduction
One of the more widely discussed tax measures this year is the temporary reduction in VAT on selected leisure and hospitality-related activities during the summer period.
From 25 June to 1 September 2026, VAT on a defined range of family attractions, children’s admission tickets and children’s restaurant meals will be reduced from 20% to 5%. The measure forms part of the Government’s Great British Summer Savings scheme and is intended to help reduce the cost of summer activities for households.
Businesses operating within these industries should ensure that their accounting systems, invoicing procedures and pricing structures correctly reflect any applicable VAT changes.
An Interesting VAT Case: KFC Dip Pots
Not all tax developments come from Budget announcements or legislation.
A recent VAT dispute involving KFC dip pots has attracted attention within the tax profession. The case centres on whether dipping sauces supplied with meals should be treated as part of a single meal for VAT purposes (and therefore standard rated) or as a separate supply (and therefore zero rated).
While it may sound trivial, cases such as these can have wider implications for how bundled products and meal deals are treated for VAT purposes.
It serves as a useful reminder that VAT remains one of the most complex areas of the UK tax system, with seemingly small distinctions sometimes resulting in significant tax consequences.
Looking Ahead
The start of the 2026/27 tax year has already brought several changes for employers, business owners and taxpayers. With payroll reforms, wage increases, dividend tax changes and VAT developments now taking effect, businesses should ensure they remain up to date and compliant.
We will continue to monitor further announcements and developments throughout the year and share any significant updates as they arise.