Many taxpayers don’t understand how the rules apply to them
New tax rules have come in from April 2026(Image: Getty)
Taxpayers have been told that they may be in for a surprise bill from HMRC. Specialists at the York-based accountancy practice Mollan & Co said that people are frequently caught off guard by the rules as they don’t understand how they work.
Rob Mollan, owner and director of Mollan & Co, urged taxpayers not to presume that little has changed in the tax system as the new financial year begins. He cautioned that in reality “millions will quietly pay more tax”.
He explained: “On the surface, tax rates haven’t changed dramatically – but that’s misleading. Frozen thresholds mean more people are being pulled into higher tax bands every year. For many, it’s a stealth tax increase they don’t see coming.”
Chancellor Rachel Reeves confirmed in the Autumn Budget 2025 that income tax bands would remain at their current levels until at least April 2031. People can earn up to £12,570 annually tax-free under the personal allowance.
Earnings exceeding this threshold are taxed at 20 per cent. The higher rate of 40 per cent applies to income above £50,271, while the additional rate of 45 per cent is levied on earnings over £125,140.
Many are still unprepared
Mr Mollan said that a significant development from April 2026 involves the introduction of Making Tax Digital (MTD). Landlords and self-employed people with income exceeding £50,000 in 2024/2025 must now maintain digital records and provide quarterly returns to HMRC.
The accountant said: “MTD isn’t just an admin change – it fundamentally alters how small businesses and landlords operate. Many people are still unprepared, which is a concern given the penalties involved.”
A further risk is that people remain unaware of how the rule affects them and the actual amount of tax they’re liable to pay. Mr Mollan said: “We regularly see people caught out by rules they didn’t even know applied to them. The tax system hasn’t just become more expensive – it’s become more complex.”
Tax bills increasing
He highlighted two poorly understood rules that warrant attention. The first concerns high earners facing an effective 60 per cent tax rate on earnings between £100,000 and £125,140, as their personal allowance gradually diminishes.
When your income exceeds £100,000, you forfeit £1 of personal allowance for every £2 earned above this level. The entire allowance disappears once your income hits £125,140.
Another escalating tax burden that people may not realise is affecting them is capital gains tax. The tax-free threshold for this charge was slashed from £12,300 to £6,000 in April 2023, then from £6,000 to £3,000 in April 2024. This marks a £9,300 reduction over three years.
The standard capital gains tax rate stands at 18 per cent for basic rate taxpayers, meaning if you’re taxed at this level on an additional £9,300 of gains, you’d face an extra £1,674 tax bill. Mr Mollan said there is a clear trend moving towards increased taxation, stricter regulations and greater reporting requirements for taxpayers. He said: “This isn’t about one big tax rise – it’s a gradual tightening across the board.
“The people who plan ahead will manage it. Those who don’t will simply pay more.”
