The 2026/27 tax year arrives against a worrying global economic backdrop, which threatens a more stable domestic economic outlook.
As doctors and dentists, your finances are uniquely shaped and influenced by the NHS pension scheme, frozen thresholds, the interaction between PAYE and private income and annual allowance considerations, to name but a few additional complications. All these factors make understanding these changes in the new tax year essential.
Below is a clear, practical overview of the key tax changes, the allowances that remain available, and the steps you can take to make your money work harder this year.
1. Income tax thresholds remain frozen
The personal allowance (£12,570), Higher‑Rate threshold (£50,270), and additional‑rate threshold (£125,140) remain frozen until at least 2031.
What this means
- More income is pulled into higher tax bands as salaries rise.
- Junior doctors and early‑career dentists may hit higher‑rate tax sooner.
- Consultants, GPs, and practice‑owning dentists are more likely to cross into the additional‑rate band.
The wider context
Although frozen thresholds increase the effective tax burden, inflation has eased significantly compared with recent years. We need to wait and see if the conflict in the far east reverses that significantly. Pay awards and private fee adjustments are no longer being swallowed instantly by rising costs, possibly giving a little more breathing room to plan around tax thresholds.
2. Marriage allowance – a simple but useful benefit
If one spouse earns below the personal allowance (£12,570) and the other is a basic‑rate taxpayer, you may be eligible for the Marriage Allowance.
This allows the lower‑earning partner to transfer 10% of their personal allowance (£1,260) to the higher‑earning partner. Once claimed, HMRC applies it automatically each year until cancelled.
Marriage Allowance: How it works – GOV.UK
A small but worthwhile saving, especially for families with one partner working part‑time or taking career breaks.
3. Dividend tax rates increase by 2%
Dividend tax rises by two percentage points for basic and higher‑rate taxpayers.
This will impact those who:
- run a private practice through a limited company
- receive dividends from investments
- own shares in other businesses
However, Company Structures still offer valuable flexibility in how and when income is taken, particularly helpful for those with fluctuating private income.
4. ISA allowances
The ISA allowance remains at £20,000, including up to £4,000 in a Lifetime ISA. But there are some changes ahead to be aware of.
From April 2027, the UK ISA landscape will undergo notable adjustments, most significantly a reduction of the Cash ISA allowance to £12,000 for savers under 65, while those aged 65 and over retain the full £20,000 limit.
Transfers from Stocks & Shares or Innovative Finance ISAs into Cash ISAs will no longer be permitted under the new rules to stop bypassing the change in cash limits.
The overall ISA allowance remains frozen at £20,000 until at least 2030/31, with similar freezes applying to Junior ISAs, Child Trust Funds, and Lifetime ISAs through 2031. The government has announced plans to consult on a new first‑time‑buyer‑focused savings product that could eventually sit alongside or replace the current LISA structure. Existing LISAs will continue to operate under current rules, including the 25% government bonus and the withdrawal penalty for non‑qualifying uses.
5. Capital gains tax (CGT) – Lower allowances, higher rates
The CGT annual exemption remains at £3,000 per individual (£6,000 for a couple if assets are structured correctly).
Transfers between spouses remain no‑gain, no‑loss, allowing both exemptions to be used.
Business Asset Disposal Relief (BADR) increases to 18%
This affects:
- dentists selling practices or shares
- doctors selling private practice rooms or medical companies
Try to speak with your accountant early to discuss planning and structured exit strategies, to explore methods of mitigating the impact of higher CGT, and speak to your specialist financial adviser to discuss investments of the proceeds that could bring tax credits or other tax advantages to offset the higher tax on the sale of your business.
6. Inheritance Tax (IHT) – Still the “Voluntary Tax” that takes work to reduce
The key allowances remain unchanged:
- Nil Rate Band (NRB): £325,000
- Residence Nil Rate Band (RNRB): £175,000 (tapering above £2 million estates)
This means an individual can pass on up to £500,000 tax‑free, or £1 million for a couple.
Don’t forget the simple allowances
- £3,000 annual gift allowance (with one year’s carry‑forward)
- Small gifts, wedding gifts, and gifts from surplus income may also be exempt
Leaving 10% or more of your net estate to charity can reduce the IHT rate from 40% to 36%.
IHT planning is complex; professional advice is strongly recommended.
See some of our previous articles on IHT here:
7. National Living Wage Increases
The National Living Wage rises to £12.71, with the 18–20 rate increasing to £10.85. This will impact you if you employ staff and are business owners.
Impact on practices
- Higher payroll costs for receptionists, dental nurses, admin teams, and support staff
- Increased pressure on practice budgets, especially in dentistry
8. National Insurance thresholds frozen
Employer Class 1 NI remains at 15%, with thresholds frozen until 2028, with the current legislative default for the Personal Allowance and the basic rate limit to increase in line with the Consumer Price Index (CPI) from 6 April 2028 onwards. This could be changed, of course.
Impact
- Rising salaries mean higher NI bills for employers and practices
- Additional sessions or private work may yield slightly lower net returns
Overall, we were heading for a more stable economic backdrop
Despite the tax pressures, the broader environment had been heading into calmer waters than in recent years until the current Middle Eastern conflict erupted.
- Inflation had fallen significantly
- Interest rates had stabilised
We wait to see the length of action and the full impact on the UK economy. In the meantime, read our latest investment article to see how your Legal & Medical Portfolio is holding up.
Final thoughts
Back to basics, with a clearer view ahead. The 2026/27 tax year presents a mixed picture. Frozen thresholds, rising payroll costs, and targeted tax increases will affect take‑home pay and practice finances. After taking all of the above into account, plus a more predictable policy environment, this is a year where thoughtful planning can genuinely pay off.
Making full use of the available allowances, ISAs, Marriage Allowance, CGT exemptions, IHT planning, and pension strategy can help you stay in control and improve your financial position.
As always, tax rules can change, and individual circumstances vary, so seeking independent financial advice is essential to ensure you’re making the most of the opportunities available.
The concepts and suggestions in this article must not be viewed as advice. As always, we recommend you approach a financial adviser who will take your circumstances into full consideration before providing advice.
Tax is dependent on your own circumstances and personal situation, and is subject to changes based on UK legislation and taxation regime. This article is based on our understanding of current legislation.
Are you ready for the next tax year? Is there anything you don’t understand? Let us know by adding a comment below