New tax year changes take effect from Monday

The new tax year starts on Monday 6 April 2026, bringing a set of tax, benefit and employment changes into effect. The Resolution Foundation, an independent think tank, set out the changes in a commentary published on 2 April 2026¹.

Tax thresholds remain frozen for the fifth year of what the foundation describes as a planned nine-year stretch. As a result, the personal tax allowance is £500 lower than it would have been if thresholds had been uprated with inflation, and most basic rate taxpayers will pay £130 a year more in tax as a result¹.

On benefits, the two child limit is being lifted. The foundation says 450,000 children will no longer be in poverty by the end of May as a result¹. It also describes the rebalancing between the standard and health-related elements of Universal Credit as the big reform that survived, bringing above inflation uprating for those on the standard rate, though that rate remains 5 per cent lower than it was in 2010, while pensions are 20 per cent higher¹.

Two employment rights change from the same date. Statutory sick pay will be available from day one of illness rather than day four, and the lower earnings limit that kept many poorer households from being paid when unwell is being scrapped¹. Unpaid parental leave becomes a day one right for both mothers and fathers¹.

Separately, the foundation modelled the effect of energy prices on household inflation across the income distribution. It cites Cornwall Insight forecasts for energy bill rises of £288 a year in July, and says that if those persist, the gap in inflation rates could reach 0.9 percentage points by the fourth quarter of 2026, with the poorest decile facing inflation of 3.8 per cent against 2.9 per cent for the richest¹. It notes the second income decile spends 11 per cent of its budget on energy bills, compared with 6 per cent for the ninth decile¹. The foundation describes this as likely an underestimate because it leaves out knock-on effects on food and other goods¹. For comparison, the Bank of England forecasts 3.5 per cent inflation by the third quarter of 2026, and the OECD puts it at 4 per cent for the year¹.

Why it matters for households

The threshold freeze means the point at which tax starts to be paid does not move with prices, so more of a pay rise is taken in tax. The foundation puts the cost at £130 a year for most basic rate taxpayers and says the allowance is £500 below where inflation uprating would have left it¹.

For families with more than two children, the removal of the two child limit changes how much support is paid, with the foundation expecting 450,000 children to be out of poverty by the end of May¹. Universal Credit claimants on the standard rate receive an above inflation increase, though the foundation notes that rate remains below its 2010 level¹.

Employees who fall ill no longer wait until the fourth day for statutory sick pay, and the lower earnings limit that excluded some lower paid workers is removed¹. Unpaid parental leave becomes available from the first day of a job for both parents¹.

Energy remains the largest single pressure the foundation identifies. It says the second income decile spends 11 per cent of its budget on energy, against 6 per cent for the ninth decile, and that under the Cornwall Insight forecasts the poorest decile could face inflation of 3.8 per cent by the fourth quarter of 2026 against 2.9 per cent for the richest¹.

What happens next

The changes take effect on Monday 6 April 2026¹. The foundation's poverty estimate for the two child limit change is dated to the end of May¹. Its inflation modelling covers the fourth quarter of 2026, based on energy bill rises of £288 a year in July¹. No further dates are given in the commentary.