New tax year brings challenges and opportunities for UK businesses
The new tax year 2026-27 will bring increased costs for businesses as well as some welcome improvements to employee share option schemes.
Increased costs and scrutiny for employers
The National Living Wage for over-21s will increase by 50p per hour from 1 April to £12.71. Businesses paying the Construction Industry Training Board Levy are also likely to see increases in their levy payments unless their total wage bill (including subcontractors) is less than £150,000.
Alongside this the lower earnings limit and waiting period has been removed for Statutory Sick Pay, while paternity leave and unpaid parental leave will be available from ‘day one’ of employment.
Employers will also be subject to the oversight of the new Fair Work Agency which will have powers to inspect workplaces, impose penalties, start civil proceeding and recover costs from employers.
Enterprise Management Incentives
From 6 April 2026, reforms to Enterprise Management Incentive (EMI) share option schemes also come into force.
EMI option schemes allow companies to grant options to employees to buy company shares at a future date at a predetermined price. They are designed to help qualifying small to medium-sized companies to provide their people stock with significant tax benefits compared to other share arrangements – and help companies with growth potential to recruit and retain employees.
EMI schemes will be available to be used by independent quoted or unquoted companies with group gross assets of £120m. Previously this limit with £30m or less.
These new rules will make EMI schemes more accessible, flexible and attractive to larger companies, meaning the tax advantages will be available to more companies and employees. They are also designed to reduce administrative complexity.
Jon Hickman, a tax partner at BDOsaid: “Businesses are unlikely to face the same level of cost increases they experienced in April 2025, but the changes to the National Living Wage will be challenging to absorb, particularly for companies that employ large numbers of younger staff, notably in the retail and hospitality sectors.
“Companies will also have to budget for changes to business rates bills which result from the update to rateable values which also takes effect from 1 April 2026.
“Many will also be bracing themselves for prolonged higher energy costs if the conflict in the Middle East continues.
“In addition to the changes coming into force this year, the new tax year should also focus minds on changes coming down the tracks, notably the payrolling of benefits in kind which comes into effect from April 2027 and the changes to pensions salary sacrifice schemes due in April 2029. Both will require significant preparation work which should not be left until the last minute.”