As the 2025/26 tax year draws to a close and self-assessment returns have hopefully been filed, now is a good time to review your finances and make sure you have taken advantage of the available tax planning opportunities. This is particularly important given the extensive changes introduced by the 2024 and 2025 Autumn Budgets.
We know the volume of changes can feel overwhelming, so we have put together a short guide summarising the key actions and deadlines you may want to consider before 5 April. While tax planning always depends on your personal circumstances, we hope this provides a useful starting point.
Reliefs and important deadlines for Capital Gains Tax (CGT) planning
Locking in reliefs
The October 2024 budget introduced important deadlines for anyone selling a business. A key focus is the CGT rate for assets eligible for Business Asset Disposal Relief (BADR). After an initial rise from 10% to 14% on 6 April 2025, the CGT rate for BADR will be lifted again on 6 April 2026 to 18%.
If you are considering a disposal, ensure your plans do not fall within the anti-forestalling rules – particularly relevant for share for share exchanges.
Annual exempt amount
The tax-free annual exempt amount for 2025/26 is set at £3,000 and cannot be carried forward. If you have assets with small unrealised gains, you may want to consider disposals before 5 April to utilise the allowance.
2025/26 Income tax reducers and allowances
Dividend rates
The UK dividend tax regime for 2025/26 includes a £500 dividend allowance, meaning the first £500 of dividend income is tax-free. Dividends above this allowance are taxed according to your total income band:
| Income tax percentage from 6 April 2025 | Income tax percentage from 6 April 2026 | |
| First £500 of Dividend income | 0% | 0% |
| Basic rate taxpayers (income up to £50,270) | 8.75% | 10.75% |
| Higher rate taxpayers (£50,271 – £125,140) | 33.75% | 35.75% |
| Additional rate taxpayers (over £125,140) | 39.35% | 39.35% |
From 6 April 2026, as announced in the 2025 Autumn Budget, the government is increasing dividend tax rates by 2 percentage points for basic and higher rate tax payers, while leaving the additional rate unchanged.
You may wish to review your investment strategy ahead of 5 April 2026, and discuss with your adviser whether there is any merit in changing your investments to reduce the level of dividends being generated.
If you are a shareholder and director in your own company, you will need to revisit your remuneration strategy taking into account the changes to tax rates to ensure this is still most tax efficient for you.
Income Tax Allowances
Taxpayers benefit from several allowances each year – these cannot be carried forward, so unused allowances are effectively lost.
If you extract profits from your company, ensure you are utilising your personal allowance (£12,570) in the most tax efficient way.
For interest income, basic rate taxpayers receive a £1,000 savings allowance, reduced to £500 for higher-rate taxpayers. Additional-rate taxpayers do not receive a savings allowance.
In some circumstances, taxpayers can receive up to £5,000 in interest tax free if their net income excluding dividends is below £18,570.
ISAs
Rising interest rates mean more savers are now paying tax on investment income. Using an ISA can shelter interest, dividends and gains from tax.
You can invest up to £20,000 in an ISA and any interest, dividends or gains generated within the ISA wrapper are tax free.
There are four types of ISAs designed to hold different kinds of assets:
- Cash ISAs
- Stocks and shares ISAs
- Innovative finance ISAs
- Lifetime ISAs
You can allocate your £20,000 ISA allowance in whatever proportion you like, although the maximum that can be contributed to a lifetime ISA per year is £4,000 per year.
The £20,000 allowance cannot be carried forward, so it is worth reviewing each year whether you would like to top up your ISA.
If you have children under 18 who are living in the UK, you can also gift up to £9,000 a year per child in a junior ISA. The amount gifted in a junior ISA does not count towards your £20,000 annual limit.
Looking forward, from April 2027 the Cash ISA limit will be reduced to £12,000 per year unless you are aged 65 or over.
Tax reducers
If you plan to invest significant capital, you may want to consider investing in tax efficient options such as Enterprise Investment Schemes (EIS), Seed Enterprise Investment Schemes (SEIS) or Venture Capital Trusts (VCTs). These offer generous tax reliefs, although typically carry a higher investment risk. We would recommend discussing suitability with an independent financial adviser. The tax benefits of these investments are summarised below:
| Asset type | Income Tax | Capital Gains Tax | Reinvestment relief | Annual subscription limit |
| EIS | Upfront income tax relief on 30% of the value of the subscription. | Exempt if sold after three years. | Capital gain on an asset is frozen if proceeds are invested in EIS shares. |
£1 million (£2 million if invested in knowledge intensive companies) |
| SEIS | Upfront income tax relief on 50% of the value of the subscription. | Exempt if sold after three years. | Half the capital gain on an asset is exempt from CGT if the proceeds of sale are reinvested in SEIS shares | £200,000 |
| VCT | Upfront income tax relief on 30% (20% from 5 April 2026) of the value of the subscription. Dividends from VCT shares are tax free. | Exempt | Reinvestment relief is not available | £200,000 |
Please note that the upfront income tax relief can be clawed back if the EIS or SEIS shares are sold within 3 years (5 years for VCT).
Gift aid
If you donate to charity, make sure you claim Gift Aid. Higher-rate taxpayers can claim additional relief via their tax return, effectively reducing the tax due on the income used to make the donation. Be mindful you cannot claim Gift Aid on donations exceeding your taxable income.
Rental income and Making Tax Digital (MTD)
Significant changes are coming for landlords. From 6 April 2027, rental profits will be taxed at new ‘property’ rates: 22% (basic rate), 42% (higher rate), and 47% (additional rate).
Basic rate credit on mortgage interest will also increase to 22%.
Before then, MTD will require many landlords to submit quarterly digital updates:
- From 6 April 2026, individuals with gross property (and/or self-employment) income over £50,000 must keep digital records and submit quarterly statements through HMRC-approved software, plus an annual declaration.
- The threshold then decreases to £30,000 from April 2027, and £20,000 from 2028.
If you hold rental property, now is a good time to review how these reforms will affect you.
Equalising your income
Where spouses or civil partners have different income levels, income may be taxed unnecessarily at higher rates. Reviewing who holds income-producing assets can improve household efficiency. Transfers between spouses (or civil partners) are normally tax-free but should be structured carefully.
Pensions
Reviewing your national insurance contribution record
From April 2025, it is only possible to make voluntary pension contributions for the past 6 years to top up any gaps in contributions.
The number of qualifying years on your record determines your eligibility for the state pension, with the full state pension becoming available with 35 qualifying years. You can make pension contributions until you reach state pension age, which is currently 67.
It currently costs £907.40 to top-up an entire year through class 3 voluntary NIC contributions. However, the cost of topping up a year may be cheaper if a partial contribution already exists.
We therefore recommend that you review your contribution record before the deadline so as not to miss out on opportunities to improve your state pension entitlement at the lower cost.
Additional personal pension contributions
Making net personal pension contributions to your pension policy also provides additional income tax relief. The income tax relief works in much the same way as for Gift Aid, except that your pension policy benefits from the gross contribution.
It is important to take care not to breach the annual allowance, as this will negate the income tax relief that you receive on the net pension contribution.
Remember: Unused annual allowance from 2022/23 must be used by 5 April 2026 otherwise it is lost.
Income tax thresholds and traps
If your income is close to key thresholds (see below), the effective tax rate can exceed 60%. Pension contributions, gift aid donations or tax-efficient investments can help reduce exposure to these tapering charges.
Income Tax relief will be even more valuable if you are within the tapering thresholds for:
- The High-Income Child Benefit Charge (£60,000 – £80,000), where Child Benefit is clawed back; or
- The tax-free and funded childcare threshold of £100,000 a year (where you lose the 25% Government top-up and access to additional funded hours if at least one parent earns more than £100,000); or
- The Personal Allowance threshold (£100,000 – £125,140), where the Personal Allowance is tapered away at £1 for every £2 over that threshold.
Inheritance tax (IHT) allowances
Agricultural property relief (APR)/Business property relief (BPR)
Following the 2024 Autumn Budget, the government initially proposed a £1m cap on APR and BPR.
In December 2025, this was increased to £2.5m per individual (or £5m for couples).
From 6 April 2026:
- First £2.5m of qualifying assets receive 100% relief
- Excess benefits from 50% relief
- Unlisted shares (e.g. many AIM shares) will only qualify for 50% relief
If you have assets previously expected to qualify for full BPR/APR, we recommend reviewing your estate plan.
Gifting
If appropriate for your circumstances, gifting assets during your lifetime can reduce future IHT exposure and assist family members.
This can be for many reasons, such as helping them with their schooling, starting out on the property ladder etc. or even to help reduce your own exposure to IHT.
Currently, IHT is payable at 40% where a person’s assets on death, together with any gifts made during the seven preceding years, total more than the nil rate band (NRB) and the Residence Nil Rate Band (RNRB). The NRB is currently £325,000 and the RNRB is up to £175,000; they are fixed at this level until April 2031.
Whatever the motivation, it is important that you are using the allowances available to you in each year, such as:
- the small gifts allowance of £250;
- the annual IHT allowance of £3,000 (or £6,000 if the previous year’s allowance is unused, as you carry it forward for one tax year);
- Gifts on consideration of marriage should also not be forgotten (£5,000 to children, £2,500 to grandchildren and £1,000 to anyone else).
Review your Will regularly to ensure it reflects your current wishes.
Next steps
If you have any questions on how to prepare for the year end, please contact us.
Please note that this content is not intended to give specific technical advice. It is designed to highlight some of the key changes rather than provide an exhaustive explanation of the topics. Professional advice should always be sought before action is either taken or refrained from as a result of information contained herein.
