Taxpayers may not realise they will be paying more tax this year (Image: Getty)
Taxpayers have been warned their HMRC bills could be creeping up going into the new tax year without them realising it. Experts at York accountancy firm Mollan & Co warned that they often see people caught out by the rules as they don’t properly understand how they work.
Rob Mollan, owner and director of Mollan & Co, warned taxpayers not to assume that little has changed going into the new financial year. He warned that in reality “millions will quietly pay more tax”.
Misleading tax rates
He said: “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. You can earn up to £12,570 a year without paying income tax in line with the personal allowance.
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Once you earn above this, you pay the tax at 20 percent. You pay the higher rate of 40 percent on earnings above £50,271 and the additional rate of 45 percent on earnings above £125,140.
Many are still unprepared
Mr Mollan said one key change from April 2026 is the rollout of Making Tax Digital (MTD). Landlords and self-employed individuals with earnings over £50,000 in 2024/2025 now need to keep digital records and submit quarterly updates 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.”
Another danger is that people don’t know how the rules apply to them and how much tax they need to pay in reality. Mr Mollan warned: “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 increases
He pointed to two little-understood rules that people should be aware of. The first is that high earners face an effective 60 percent tax on their income between £100,000 and £125,140, as they gradually lose their personal allowance.
Once your income moves above £100,000, you lose £1 of the personal allowance for every £2 you earn above this threshold. You lose the entire allowance once your income reaches £125,140.
Another rising tax bill that often catches people out is capital gains tax. The tax-free allowance for this levy was cut from £12,300 to £6,000 in April 2023, and from £6,000 to £3,000 in April 2024. This represents a £9,300 cut compared to three years ago.
The main rate of capital gains tax is 18 percent for basic rate taxpayers, so if you pay this rate on an extra £9,300 of gains, you would pay an extra £1,674 in tax.
Mr Mollan said there is a clear direction of travel towards higher tax, tighter rules and more reporting obligations for customers. He warned: “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.”