CNBC’s UK Exchange: UK faces rising bills as new tax year begins

Hello. Welcome to this week’s CNBC UK Exchange.

This week I am assessing the many changes that are taking place with the start of the new tax year and the largely negative impact they will have on UK households and businesses.

These changes come on top of a series of cost increases for various services that were launched at the beginning of the month.

Coupled with rising energy costs due to conflicts in the Middle East, the coming months are sure to make the Labor government even more unpopular.

In most countries in Europe, Latin America, and Asia, the new tax year begins on January 1st. In the UK, due to historical specificity, it begins on April 6th.

Since the Middle Ages, it began on March 25th, which is also New Year’s Day.

But in 1752, the government replaced the old Julian calendar introduced by Julius Caesar with the more accurate solar calendar.

This shortened the year by 11 days, so authorities brought forward the start of the new tax year by the same amount. In 1800, it was moved up an extra day to compensate for the leap year fraud.

The start of the 2026-27 tax year will be tough for working Brits and small businesses. Tax thresholds and benefits will remain frozen, meaning people whose wages rise in line with inflation or who benefit from minimum wage increases will see even more money go to income tax.

Some workers may end up moving into higher tax brackets. While more estates will be dragged into paying inheritance tax, the changes will also begin to target wealthy ‘non-dom’ residents. Dividend tax rates will rise, relief for agricultural and business property will be eased, as will tax breaks for investors in venture capital trusts.

Targeting an estimated 860,000 self-employed individuals and landlords, the new ‘digital tax’ rules will require anyone earning more than £50,000 ($66,419) from self-employment or property to submit quarterly updates on their income and expenditure to HM Revenue and Customs. The Federation of Small Businesses has warned of rising compliance costs.

At the same time, hundreds of thousands of businesses are facing rising business rates – a long-term hardship – as all commercial property in England and Wales is revalued. Employers are now also obligated to provide maternity, paternity and paid sick leave from the moment an employee joins the company.

There will be some winners. Benefit payments have increased, and the cap that limited benefits to two children per household has been removed.

Confusingly, other tax increases have already begun on April 1, the start of the government’s fiscal year.

Most mobile and broadband providers have increased their rates, while regulator Ofwat is allowing water companies to increase rates to fund infrastructure improvements. Industry body Water UK predicts that bills will increase by an average of 5.4%, or around £32.40 a year.

The TV license fee, which funds the BBC, and the car excise tax that motorists must pay to drive their cars legally are also rising.

The biggest increase in household bills will be an increase in council tax, the hypothetical levy (paid from after-tax income) that funds local services. Most councils in England have increased this by 4.99%, which equates to an average increase of £114 per year, but some councils, such as Shropshire, Worcestershire and North Somerset, have increased this by as much as 8.99%.

All of this, on top of rising gasoline prices due to the Middle East conflict, will accelerate inflation and significantly reduce disposable income. The savings from the freeze on regulated rail fares and the government’s decision to switch some green taxes from household to general taxation will certainly be negated.

However, these revenues will also decline as employers in retail and service industries raise prices to reflect higher costs, particularly higher minimum wages and higher utility bills.

Stuart Machin, CEO of a major retailer marks and spencerwrote two weeks ago that government-imposed levies now account for more than half of his company’s energy costs.

Meanwhile, energy price ceilings are expected to rise again in the summer due to the effects of the Middle East war. We expect a very unpleasant summer and early fall for consumers and, by extension, for governments.

— Ian King

Novo Nordisk’s Wegovy has been approved by the UK drug price watchdog for heart disease. New recommendations from the National Institute for Health and Care Excellence will significantly expand access to Wegovy in the country’s National Health Service (NHS).

Farmers are facing soaring prices due to fertilizer shortages. British farmer Caroline Harriott spoke to CNBC’s Ben Boulos about the risks to agriculture and food inflation if fertilizer can no longer pass through the Strait of Hormuz.

President Trump has said he is considering withdrawing the United States from the “Paper Tiger” NATO. The comments came a day after the president criticized Britain by name while urging other countries to take action on the Strait of Hormuz, a vital oil route that Iran effectively cut off during the war.

— April Roach

April 8: Halifax Home Price Index for March

April 14: March BRC Retail Sales Monitor

April 16th: February GDP