February 2026 Newsletter | Cylchlythyr Misol Chwefror 2026
As we near the end of the tax year, here are some matters to consider before 5 April:
1. Bonus payments - are you hoping for an employee bonus in the next few weeks? Check if the bonus will tip you into a higher tax bracket (you could end up paying 40% or even 60% income tax on the bonus!), or if you will cross the threshold to have to repay child benefit.
This can be mitigated through options such as personal pension contributions or charitable donations via Gift Aid, but these need to be actioned before 5 April 2026.
2. Gifts - are you planning to make financial gifts to family members? Remember, you can give up to £3,000 each tax year exempt from inheritance tax. You can also carry forward any unused allowance, but only from the previous tax year.
3. ISAs - have you fully utilised your £20,000 tax-free ISA allowance? Remember that from 6 April 2027 the £20,000 allowance for cash ISAs will reduce to £12,000 for those under 65 years of age, therefore you may wish to maximise your ISA contributions before this change.
4. Dividends - from 6 April 2026, income tax rates on dividends are increasing by 2% for basic-rate and higher-rate taxpayers to 10.75% and 35.75%, respectively. If you are working via a limited company, and are planning to pay yourself a dividend in March & April 2026, you may wish to pay this before 5 April 2026 to take advantage of the lower tax rate.
5. Tax codes - HMRC have started to issue new tax codes for the upcoming, 2026-2027 tax year. Please check your tax code, and if you ever notice your take home pay changing drastically from one month to the next, check with your accountant or with your employer.
Ask Huw & Aled
Q: I am a self-employed builder and I also own a rental property. I hear that HMRC are changing their tax return requirements for those who are self-employed or landlords. What's happening and what do I need to do?
A: If your total gross income from self-employment and/or property exceeded £50,000 in your 2024-2025 tax return, you are likely to be impacted by Making Tax Digital for Self-Assessment from April 2026 onwards.
In one of the most significant changes ever made to income tax, affected taxpayers will need to:
· Sign-up to Making Tax Digital using HMRC's new online system
· Submit quarterly 'updates' to HMRC of their total income and total costs via compatible software
· Keep digital records of all business income and expense transactions
Now is the time to fully prepare for these changes. Contact an accountant to get to grips with all of the new demands and in the meantime, you may wish to review the full details of the new measures, which can be found here:
https://www.huwaledaccountants.com/services/making-tax-digital-for-income-tax
