With the start of the 2026/27 tax year approaching, a number of important tax changes are due to take effect.
While some measures have already been introduced in earlier legislation, others will come into force from April 2026 and beyond, affecting dividend taxation, inheritance tax reliefs, and the taxation of foreign income.
Many of these changes were first announced in the Autumn Budget 2024 and subsequently clarified through draft legislation and Finance Acts during 2025.
In particular, reforms to Business Property Relief (BPR) and Agricultural Property Relief (APR), changes to dividend tax rates, and the introduction of the Foreign Income and Gains (FIG) regime represent significant developments that taxpayers and business owners should be aware of when planning ahead.
Below is a summary of the key changes taking effect from April 2026 and those scheduled for the following year.
Changes to tax rates
From 6 April 2026, the main tax rate changes relate to dividend income. The income-tax bands remain frozen and unchanged. Dividend tax rates rise by 2 percentage points for basic and higher rate taxpayers.
Income tax on dividends;
| Band | 2025-26 | From Apr 2026 |
| Basic rate | 8.75% | 10.75% |
| Higher rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% (unchanged) |
The larger increases to savings andproperty income tax rates come into effect from 6 April 2027 and represent a 2% increase in tax rates to each of the basic, higher and additional tax rates.
Business Property and Agricultural Property Relief
From 6 April 2026, the UK will introduce significant reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) for Inheritance Tax (IHT).
These changes were announced in the Autumn Budget 2024 and amended during 2025, with draft legislation confirming an enlarged £2.5 million cap on 100% APR/BPR relief and other restrictions.
From 6 April 2026, only the first £2.5 million of combined APR plus BPR assets per individual will qualify for 100% relief. Value above £2.5 million will receive 50% relief only (so an effective IHT rate of 20% on this part).
Unused allowances can be transferred on death between spouses only. Married couples and civil partners may have up to £5m at 100% relief between them.
This applies even if the first death occurred before April 2026.
If BPR qualifying assets are to be left to beneficiaries other than a spouse on death, asset holdings should be balanced so each spouse can make use of the full £2.5m allowance and none of it is wasted.
Gifts made prior to April 2026 are not subject to the new rules, provided the transferor does not die within seven years of the gift. Likewise, transfers into trusts are not subject to the new rules, although the new rules will apply to the ten anniversary charges for those trusts in the relevant property trust regime.
The £2.5m BPR/APR allowance will apply to trusts in most circumstances, but the rules are complex so advice should be taken.
As far as gifts to individuals are concerned, the £2.5m allowance resets every seven years, thus enabling gifts to made during the lifetime and potentially on death, if structured correctly. This will promote gradual transitions of family businesses but negates the previously adopted planning of transitioning businesses on death and benefitting from an uplifted capital gains tax base cost for the future, as for CGT purposes, assets inherited on death are rebased to market value at the date of death.
Finally, AIM shares that currently qualify for 100% BPR will, from April 2026, only receive 50% relief in all cases and the £2.5m allowance does not apply to them.
Foreign income and gains regime
The ‘Foreign income and gains’ (“FIG”) rules are the UK’s tax regime for foreign income and gains, introduced in the Finance Act 2025 and effective from 6 April 2025, replacing the remittance basis for non-UK domiciled individuals.
The FIG regime allows qualifying individuals to receive foreign income and gains tax-free in the UK for a period of 4 tax years beginning with the first year in which the individual is UK tax resident. It replaces the old system where non-domiciliaries could avoid UK tax by not remitting income to the UK.
The regime is available to individuals who have been non-UK tax resident for at least 10 consecutive tax years. A claim must be made each year, detailing the foreign income and gains on which exemption is claimed.
The Temporary Repatriation Facility (TRF) allows old foreign income/gains, previously sheltered with the remittance basis, to be remitted at a reduced tax rate:
From April 2025, IHT is based on the concept of Long Term Residence, not domicile. A Long-Term Resident is liable to UK IHT on worldwide assets, whereas a Non-Long Term Resident is only liable to UK IHT on UK situs assets.
A person is a Long Term Resident if they have been UK tax resident for at least 10 out of the last 20 years.
In the case of someone who has lived in the UK for 20 years, they cease to become Long Term Resident after 10 years of non-UK tax residence. The number of non-UK tax residency years required to lose Long Term Resident status for someone who has lived in the UK between 10 and 20 years depends on the number of years they have been UK tax resident. There is always a required minimum of 3 years of non-UK tax residency before long term residence status is lost.
IHT Pension changes (from 6 April 2027)
From 6 April 2027, most unused pension funds and death benefits will be included in the deceased’s estate for IHT purposes, previously most pension schemes were outside the estate.
After 2027 they will usually be included when calculating IHT. In brief, the deceased is treated as owning the pension immediately before death.
Responsibility for the IHT will move to the Personal Representatives (PRs) of the deceased, not the pension scheme, although the PRs can pay the IHT liability direct from the pension scheme, thus avoiding the potential double tax effect of having to extract funds from a scheme generating an income tax liability to fund an IHT liability.
Some pension benefits remain outside the IHT charge;
The upcoming tax changes represent a significant shift in several areas of the UK tax system so planning ahead is key. If you would be interested in receiving tailored expert advice, please contact one of our specialists.
ISA Reform
From 6 April 2027, the UK’s £20,000 annual ISA allowance will remain in place, but for most adults under 65 the amount that can be paid into a Cash ISA will be capped at £12,000, with the remaining £8,000 needing to go into investment-based ISAs such as Stocks & Shares ISAs.
People aged 65 and over will be exempt, retaining the full £20,000 Cash ISA allowance, creating a new age-based split in the system.
The Government says the reform is designed to encourage greater investment in UK businesses and improve long‑term returns, arguing that the UK saves too much in cash compared with other major economies.
The change comes alongside higher taxes on savings interest outside ISAs from April 2027, increasing the value of tax‑free ISA protection even as access to cash within ISAs is restricted.
Guiding you through the changes
Our specialist tax experts are on hand to guide you through the implications for your specific circumstances and support you through the changes. Contact the team today.
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