Budget coverage tells you what changed. It rarely tells you what it cost you. Put your headcount, hours and dividends in below and this compares your business under 2025/26 rules against 2026/27 rules, holding everything else still, so the number that comes out is the law’s doing rather than your own.
Three changes carry most of the cost for a small employer. The National Living Wage went from £12.21 to £12.71 an hour for those aged 21 and over, and from £10.00 to £10.85 for 18 to 20 year olds — the steepest rise in proportion, so businesses with young teams took the biggest hit. Basic and higher rate dividend tax each rose two percentage points, to 10.75% and 35.75%, which is the largest single line for most owner-managers. And the taxable percentage on an electric company car went from 3% to 4%.
What did not change matters as well, and the calculator says so explicitly rather than leaving it out: employer National Insurance stayed at 15% above £5,000, the Employment Allowance stayed at £10,500, corporation tax and the VAT threshold were untouched, and income tax thresholds stayed frozen — now until April 2031, which quietly costs more each year than most of the changes that get announced.
One thing to watch for in your own figures: every pound of wage rise costs more than a pound, because employer National Insurance at 15% and pension at 3% both apply on top of it. The calculator shows that multiplier for your payroll.
2026/27 tax year
Rates checked 17 August 2026
How this is worked out
This compares your business under 2025/26 rules against 2026/27 rules, holding your headcount and hours still. It is not a forecast — it isolates what the law changed in April 2026 from everything else that moved in your payroll.
On the wage bill, the National Living Wage rose from £12.21 to £12.71 for those 21 and over, and by more in proportion for 18 to 20 year olds, from £10.00 to £10.85. Employer National Insurance at 15% and pension at 3% then apply to the higher pay, so each pound of wage rise costs more than a pound.
On profit extraction, basic and higher rate dividend tax each rose two percentage points, to 10.75% and 35.75%. The additional rate did not change. For a director taking £40,000 in dividends this is the largest single line in most results.
Employer National Insurance rates and thresholds, income tax bands, corporation tax and the VAT threshold were all unchanged in April 2026. Where a figure did not move, the calculator says so rather than quietly leaving it out.
The figures it uses
- National Living Wage: £12.21 in 2025/26, £12.71 in 2026/27
- 18 to 20 rate: £10.00 then £10.85; under-18 and apprentice £7.55 then £8.00
- Dividend tax: 8.75% and 33.75% in 2025/26, 10.75% and 35.75% in 2026/27; additional rate 39.35% throughout
- Employer National Insurance: 15% above £5,000 in both years, Employment Allowance £10,500
- Electric car appropriate percentage: 3% then 4%
- Business rates multipliers from April 2026: 38.2p and 43.2p small, 43.0p and 48.0p standard, 50.8p at £500,000 rateable value and above
All figures checked against HMRC, gov.uk and Bank of England sources on 17 August 2026. This is general information, not tax advice — for anything with real money on it, put it past your accountant.
Questions
What changed for small businesses in April 2026?
Three things carry most of the cost: the National Living Wage rose to £12.71 an hour for those 21 and over, basic and higher rate dividend tax each rose two points to 10.75% and 35.75%, and the taxable percentage on an electric company car went from 3% to 4%. New business rates multipliers also took effect, with permanently lower rates for retail, hospitality and leisure. Employer National Insurance, income tax bands and corporation tax were left alone.
Did employer National Insurance go up in April 2026?
No. It stayed at 15% on earnings above the £5,000 secondary threshold, and the Employment Allowance stayed at £10,500. The increase that hurt was April 2025, when the rate went from 13.8% to 15% and the threshold fell from £9,100 to £5,000. What April 2026 added was employer NI on top of the higher minimum wage.
How much more dividend tax will I pay in 2026/27?
Two percentage points more on dividends falling in the basic and higher rate bands, so £20 per £1,000 of dividend income in either band. A director taking £40,000 of dividends on top of a £12,570 salary pays roughly £800 more than under 2025/26 rates.
Are income tax thresholds still frozen?
Yes, and for longer. The £12,570 personal allowance, the £50,270 higher rate threshold and the main National Insurance thresholds are now held until April 2031. As pay rises against fixed thresholds, more of each pay rise is taxed at the higher rate — which is a cost to your staff, and pressure on your wage bill, without any rate changing.
What is coming that is not in this calculator yet?
From April 2029, National Insurance relief on pension contributions made by salary sacrifice is capped at £2,000 a year. Making Tax Digital for Income Tax continues to phase in by turnover. Both are far enough out to plan for rather than budget for, and both will be added here as their start dates approach.
Other Smart SME tools
- Cost of an Employee Calculator What a hire really costs once NI, pension and holiday are counted.
- Late Payment Interest Calculator Statutory interest and compensation you can legally add to an overdue invoice.
- Company Car Tax Calculator BIK and salary sacrifice on an electric company car, against the petrol or diesel it replaces.
This page is built to be rewritten
The next Budget is expected in late autumn. When it lands, this calculator gains a third column and the comparison becomes what the new measures will cost you from the April after — same inputs, same layout, new rates. If that is the version you want, the weekly Smart SME email is where it will be announced first.