Tax planning for 2026/27: what has changed, and what to do before 5 April 2027

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We are now halfway through the 2026/27 tax year. Several important changes took effect on 6 April 2026, and more are due on 6 April 2027. This article rounds up the changes most likely to affect individuals, landlords and business owners, and highlights the practical steps worth considering before the tax year ends.

1. Frozen thresholds are still doing the heavy lifting

The £12,570 personal allowance and the £50,270 higher-rate threshold have been frozen since April 2021. The November 2025 Budget extended that freeze until 5 April 2031.

The £100,000 threshold, where the personal allowance starts to be withdrawn, has never moved since 2010. Income between £100,000 and £125,140 is still taxed at an effective 60%. Above £125,140, the 45% additional rate applies.

What this means: pay rises and inflation are quietly pushing more people into higher bands. If your income is close to £50,270, £60,000, £100,000 or £125,140, it is worth checking whether pension contributions or timing of income can keep you on the right side of the line.

2. Dividend tax has gone up

From 6 April 2026, the dividend tax rates rose by two percentage points:

The tax-free dividend allowance remains £500.

What this means for company owners: the salary and dividend mix that worked last year may not be optimal now. A salary at the personal allowance level, topped up with dividends, is still common. But the right figure depends on your other income, your age and whether your company can use the £10,500 employment allowance. A review this year is sensible.

3. Landlords and savers: a 2% rise is coming in April 2027

From 6 April 2027, income tax on rental profits and interest income will be two percentage points higher than the main rates. In practice that means 22%, 42% and 47%.

Two further changes arrive at the same time:

• Mortgage interest relief for residential landlords will be given at 22% rather than 20%.
• A strict ordering rule will apply. Employment, self-employment and pension income will be taxed first, then property income, then interest, then dividends. Landlords who also have a salary will often find their whole rental profit taxed at 42%.

What this means: if you own rental property alongside a job, the effective tax on those profits is going up. Options to discuss include holding property in the name of a lower-earning spouse, reviewing the timing of income and expenses around 5 April 2027, and comparing property returns with tax-free returns available inside an ISA or pension.

The personal savings allowance (£1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers) and the £5,000 starting rate for savings remain available.

4. Capital gains tax

The main CGT rates are 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. The annual exemption is just £3,000. Business Asset Disposal Relief now gives a rate of 18%, up from 14% last year and 10% the year before.

Practical points for anyone planning a sale this year:

• Spouses and civil partners each have a £3,000 exemption, and transfers between them are free of CGT.
• If your income is below £50,270, some of your gain can be taxed at 18% rather than 24%.
• Losses must be realised by 5 April 2027 to set against this year’s gains, and should be reported so they can be carried forward.
• Sales of UK residential property must be reported, and a payment on account made, within 60 days of completion.

5. Inheritance tax: the biggest changes are for farms, businesses and pensions

The £325,000 nil rate band has been frozen since 2009 and will now stay at that level until April 2031. The £175,000 residence nil rate band is frozen for the same period.

Three changes matter particularly in Norfolk, where farming and family businesses are so common:

• Agricultural and business property relief: from 6 April 2026, 100% relief is capped at a combined £2.5 million per person. Above that, relief drops to 50%, giving an effective rate of 20%. Any unused cap can pass to a surviving spouse, and the tax can be paid in ten interest-free annual instalments.
• AIM shares: relief reduced to 50% from 6 April 2026.
• Pensions: unused pension funds will fall within the estate for IHT from 6 April 2027.

Smaller annual steps still count. The £3,000 annual gift exemption can be carried forward one year, small gifts of £250 per person are exempt, and regular gifts out of surplus income can be exempt if made habitually.

6. Pensions and ISAs

Pension contributions remain one of the most effective tools available:

• The annual allowance is £60,000, with unused allowance from the previous three years potentially available.
• Higher-rate taxpayers get 40% relief. Those with income between £100,000 and £125,140 can get an effective 60%.
• Parents with income between £60,000 and £80,000 can also reduce the child benefit charge, because contributions lower “adjusted net income”. With two children the combined relief can exceed 50%.
• Salary sacrifice pensions will be capped at £2,000 of national insurance-free contributions from April 2029, so the current arrangement remains fully available for a few more years.

The £20,000 ISA allowance is frozen until April 2031. From 6 April 2027, the cash ISA limit falls to £12,000 for those under 65, with the balance available for stocks and shares ISAs. Anyone relying heavily on cash ISAs may wish to use the full £20,000 cash limit while it lasts.

7. Business owners: a mixed picture

• Employer’s national insurance is 15% on salaries above £5,000. The £10,500 employment allowance offsets much of this for the smallest employers.
• Corporation tax remains at 19% up to £50,000 and 25% above £250,000, with an effective 26.5% marginal rate in between. The Government has said these rates will hold for the current Parliament.
• Capital allowances: the £1 million annual investment allowance stays. The 100% first-year allowance for new electric cars has been extended to April 2027. The main writing-down rate for other cars fell from 18% to 14% in April 2026.
• Incorporation relief must now be claimed for transfers after 5 April 2026, rather than applying automatically.
• Making Tax Digital for Income Tax began in April 2026 for sole traders and landlords with gross income over £50,000. The £30,000 group joins in April 2027, and the £20,000 group in April 2028.
• National living wage rose to £12.71 for those aged 21 and over from 1 April 2026.
• VAT e-invoicing becomes mandatory from April 2029. PDF invoices emailed to customers will not count.

Before 5 April 2027: a short checklist

1. Review your salary and dividend mix for the new dividend rates.
2. Check whether pension contributions can bring you below a key threshold.
3. Use ISA allowances, including the current £20,000 cash ISA limit.
4. Consider whether rental property or savings should be held by a lower-earning spouse before the April 2027 rate rise.
5. Make use of annual CGT and IHT exemptions, and record any capital losses.
6. If you have a farm, family business or significant pension, revisit your IHT position in light of the new caps.
7. Confirm whether MTD for Income Tax applies to you from April 2027, and get digital records in place.

How we can help

Every one of these changes interacts with your personal circumstances. What saves tax for one client may cost another. If you would like to talk through your position before the end of the tax year, please get in touch with the team at Jermyn & Co.

This article is general guidance only and does not constitute tax, legal or financial advice. Rates and thresholds are based on legislation and announcements as at September 2026 and may change.