British households are set to see their finances squeezed throughout 2026 as a series of tax changes, many announced in the Labour Party's Autumn Budget, come into force. While income tax and National Insurance rates remain frozen, a raft of other adjustments will collectively cost families thousands of pounds.
Direct Hits on Daily Spending
The Chancellor confirmed that alcohol duty rates will rise in line with RPI inflation from February 2026. This 3.66% increase translates to around an extra 2p on a pint of beer and 10p on a bottle of wine. The government states this inflation-linked rise maintains the real-terms value of the duty.
Motorists will also lose a key relief. The temporary 5p cut to fuel duty, introduced during the pandemic, will remain only until August 2026. A full reversal to pre-2022 rates is scheduled by March 2027, signalling higher costs at the pump ahead.
In a further blow to household budgets, most councils in England have implemented the maximum 5% council tax increase allowed without a local referendum. Authorities including Birmingham, Bradford, and Somerset were granted special permission to impose even steeper rises.
New Taxes and Changing Rules
Significant reforms are arriving for inheritance and business taxes. From 6 April 2026, new rules affect how inheritance tax applies to farms, businesses, and certain shares. A new cap means people can pass on up to £2.5 million of qualifying farm or business assets tax-free, with any value above that taxed at 20%. Separate rules will introduce a £1 million cap on inherited agricultural assets.
The taxman is also catching up with modern work habits. The ability for employees to claim tax relief for extra household costs when working from home will end from April 2026, scrapping the flat £6 per week allowance.
For investors, the dividend tax rate is rising. Basic rate taxpayers will see the rate jump from 8.75% to 10.75%, while for higher rate taxpayers it increases from 33.75% to 35.75%.
Targeted Levies and Digital Shifts
The government is introducing new, targeted taxes on consumption. A new UK vape tax will take effect from October 2026, imposing a duty of £2.20 per 10ml on all e-liquids, whether they contain nicotine or not. This is in addition to VAT, meaning significant price hikes for users.
Tobacco duty is also increasing sharply. Rates rose in November 2025 and will rise again on 1 October 2026 by RPI inflation plus 2 percentage points, with an additional £2.20 per 100 cigarettes.
Millions of sole traders and landlords face a digital overhaul. From 6 April 2026, those with an annual trading or rental income over £50,000 must follow Making Tax Digital rules. This requires keeping digital records and submitting quarterly updates to HMRC instead of a single annual return.
A small but notable change will see payments for cancelled shifts for zero-hour contract workers become subject to Income Tax and National Insurance, as these payments become a statutory right.
Citizens Advice has warned that the cumulative impact of high living costs continues to strain households. Dame Clare Moriarty, chief executive, stated: "The cost-of-living crisis is not over. Stubbornly high bills and increasing living costs mean four million people are in a negative budget." The charity is calling for better-targeted support on housing and utility bills to help those struggling the most.
