The last two Budgets have brought a flurry of tax changes. Some landed straight away, others are arriving from 6 April this year, from April 2027 and further down the track. With the tax take at record highs, using your allowances and understanding what is changing has never mattered more.
As we run up to the end of the tax year, here’s your guide to the actions worth thinking about now and the updates coming soon. This year, 5 April falls on Easter Sunday, so the final business day to get things done will be Thursday 2 April. After that, it’s chocolate time.
Dividend Tax
Dividend tax rates rise by 2 per cent from 6 April 2026 for basic (to 10.75%) and higher rate (to 35.75%) taxpayers. If you’re a business owner, there may be scope to accelerate dividends into the current tax year. The dividend tax additional rate is unchanged at 39.35%.
It may be worth considering whether quoted shares can be sold and repurchased via ISAs (a ‘bed and ISA’ transaction) so future dividends fall outside the scope of income tax altogether, although this could trigger a capital gains tax bill on shares sold with accrued gains.
The dividend tax credit for non‑residents is being abolished, which could increase liabilities for those affected.
Capital Gains Tax (CGT)
The CGT annual exemption is now only £3,000. Gains above this are taxed at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. Married couples and civil partners can transfer assets to make full use of both exemptions and lower rate tax bands.
Business Asset Disposal Relief (BADR) currently gives a 14% CGT tax rate on up to £1 million of eligible business gains, but this increases to 18% from 6 April 2026. Anyone selling a business, or shares in a business, should be aware of the potential jump in tax if completion slips into the next tax year.
Income Tax: Use Your Allowances
The personal allowance is £12,570 , tapering away once income exceeds £100,000. This creates the well-known 60% effective rate ‘tax trap’. Personal pension contributions and charitable gifts can help recover the personal allowance.
The savings allowance is £1,000 for basic rate taxpayers and £500 for higher rate taxpayers (£0 for additional rate taxpayers). The dividend allowance is only £500 this year for all taxpayers.
Income equalisation remains important. Spouses should make sure they are both using their allowances and tax bands fully.
Income tax on interest and rental income increases by 2% from April 2027 for all tax payers. Reviewing your savings arrangements now, and the timing of interest payments prior to April 2027, could help reduce tax.
Inheritance Tax (IHT)
IHT is charged at 40% on the value of estates above £325,000. The residence nil rate band of £175,000 may apply where a home is passed to direct descendants but this tapers to zero for estates above £2.35m.
Everyone can gift £3,000 each year without a risk of exposure to IHT. In addition, gifts of up to £250 can be made each year to an unlimited number of individuals (although no one person can receive both the £3,000 and £250 gifts) Regular gifts out of surplus income can also be exempt, although the intention to make such gifts should be documented. Keeping a clear record of gifts helps executors enormously.
From 6 April 2026, 100% IHT relief for agricultural and business assets will be restricted to the first £2.5m of value. Above that, only 50% relief will be available. The £2.5m allowance will be transferable on death between spouses or civil partners. More detail here: Business Property Relief 2026 Changes | Inheritance Tax Planning
For AIM shares, the current 100% IHT relief drops to 50% from 6 April 2026. To maintain 100% relief (subject to the new £2.5m limit), a reinvestment into alternative qualifying business property can be made, however 100% will only be available after the new property has been held for 2 years (otherwise, the 50% rate will apply).
Unused pension funds and death benefits will become subject to IHT as part of a person’s estate from April 2027. This could push some estates over the £2.35m threshold and lead to the loss of the residence nil rate band. Consolidating multiple pension pots won’t reduce IHT but it will make administration for executors a lot simpler.
Existing Wills should be reviewed, or new Wills drafted, to ensure that potential exposure to IHT on death is minimised, particularly in light of these significant IHT changes.
Self Employed Individuals and Landlords
Making Tax Digital arrives from 6 April this year for those with gross income (not profits) above £50,000. Quarterly reporting to HMRC will be required. The threshold drops to £30,000 in 2027 and £20,000 in 2028. More detail here: Get Ready for Making Tax Digital for Income Tax Self Assessment
Landlords who would prefer to avoid additional admin may want to assess their property portfolio and consider CGT planning ahead of any sales.
Pensions
The maximum annual allowance for pension contributions is £60,000, including employer and employee contributions. This allowance tapers for individuals with total gross income above £260,000, reducing to a minimum allowance of £10,000 once income reaches £360,000.
If this year’s allowance is fully used, unused allowances from the previous three years can be carried forward if you were a member of a qualifying pension scheme.
Pension contributions can also help restore the personal allowance for those with income in excess of £100,000 or reduce income for child benefit purposes if income is in excess of £60,000 (when the High Income Child Benefit Charge may apply).
The minimum age to access pension benefits rises to 57 from April 2028, from 55 currently. Pension salary sacrifice will have a £2,000 cap from April 2029, after which NIC will become payable, so planning ahead, and making additional pension contributions before the cap takes effect, may pay off.
ISAs
The ISA allowance remains at £20,000 per adult and £9,000 for Junior ISAs.
The Lifetime ISA (LISA) allowance stays at £4,000 and earns a 25% HMRC bonus each year. A review of LISAs is under way and changes may be introduced from April 2028.
From April 2027, the cash ISA limit for under 65s drops from £20,000 to £12,000 (although stocks and shares ISA will retain the £20,000 limit). Anyone wishing to maximise cash ISA contributions has this year and next to invest £40,000 before the restriction bites.
Other Tax Efficient Investments
Venture Capital Trust (VCT) income tax relief falls from 30% to 20% from 6 April 2026. Dividends and capital gains remain tax free if held for five years.
Enterprise Investment Scheme (EIS) income tax relief remains at 30%, with capital gains also tax free after three years and the option to defer CGT from other asset sales by reinvesting gains.
There may be value in maximising Venture Capital Trust (VCT) investments before the relief falls, while keeping in mind the higher investment risks associated with VCTs and EIS.
Get in Touch
This information is not a personalised recommendation. Speak to your adviser before taking action.
Tax efficient investments carry risk. Values can fall as well as rise and you may get back less than you put in. Past performance does not predict the future. EIS is a high‑risk investment and you are unlikely to be protected if something goes wrong. Don’t invest unless you’re prepared to lose all the money you invest.
Tax planning advice is not regulated by the FCA. This reflects our understanding of the law and HMRC practice as of 12 February 2026 and could change if legislation changes.
