MTD, IR35 & Dividend Tax: 3 Changes Reshaping Freelancing in the UK in 2026

This year won’t be a quiet year for the UK’s independent professionals. Three major shifts are coming this year that will affect how you report income, who holds tax responsibility and how much you take home:

From 6 April 2026, the way you report income is getting a digital makeover. If you’re a sole trader or landlord with a gross turnover above £50,000, you’ll be moving to HMRC’s Making Tax Digital system.

What's changing? The days of one big annual Self Assessment are fading. Instead, you’ll need to:

- Keep digital records of all transactions.
- Submit quarterly updates to HMRC.
- File a final year-end declaration.

Important: You won’t be able to file directly through the HMRC portal anymore. You’ll need compatible software (like FreeAgent or Xero). While there’s a "soft landing" on penalties until 2027, the move is designed to make tax a year-round habit rather than a January headache.

The £50k threshold is based on your gross turnover, not your profit. If you’re earning between £30k–£50k, your turn starts in April 2027.

This is one of the more empowering shifts for 2026. The government is raising the "Small Company" threshold, meaning about 14,000 more UK companies will now be classified as "small" for IR35 purposes.

The thresholds are rising to:

- Turnover: £15 million.
- Balance sheet: £7.5 million.

When you work with a "small" company, the responsibility for determining your IR35 status shifts back to you.

That means:

- No more blanket PAYE decisions: You decide if the project is "Outside IR35."
- Greater Flexibility: You have more control over how you structure your contract and your work.
- The Trade-off: With great power comes... legal liability. If HMRC challenges the status, it’s your limited company on the hook, not the client’s.

So in short you will have more control but also more responsibility.

If you operate through a limited company and pay yourself via dividends, you’ll see a slight change in your take-home pay. From 6 April 2026, dividend tax rates are increasing by 2 percentage points across the board.

- Basic rate: 8.75% → 10.75%
- Higher rate: 33.75% → 35.75%

The £500 dividend allowance remains.

The £500 tax-free allowance stays put, but for anything above that, you’ll pay more. For example, taking £40,000 in dividends will cost you roughly £790 more per year. It’s not a dealbreaker, but it’s worth factoring into your 2026 financial planning.

The 2026 landscape is all about proactivity.

Between more frequent reporting and more personal responsibility under IR35, staying organized is your best competitive advantage. At Malt, we’re here to help you navigate these changes so you can focus on what you do best: delivering great work for your clients.

While you're preparing for 2026, it's a good moment to review and update your Malt profile so clients can easily find and engage you.

Don’t hesitate to reach out to our Customer Care team at [email protected].