A new tax year usually brings in a fresh set of rules, and 2026/27 is no exception. In fact, this year sees several significant changes landing at once, affecting dividend income, capital gains on business sales, Inheritance Tax (IHT) reliefs, and the upfront tax relief available on certain investments.
Individually, each change might seem manageable. Together, they make proactive financial and tax planning more important than ever. This article walks you through the key reforms, what they mean, and what you can do to protect your position.
Agricultural and Business Property Relief
Agricultural Property Relief (APR) and Business Property Relief (BPR) have long been the cornerstones of estate and succession planning for farmers and business owners.
Under the previous rules, you could pass any qualifying assets to the next generation largely free of IHT. This valuable relief allowed family farms and businesses to be handed down without forcing a sale to cover a tax bill.
From April 2026, that changed for larger estates. The 100% relief remains in place, but only on combined qualifying assets up to £2.5m. Above that threshold, relief drops to 50% on the excess.
For example, a family farm or business estate with qualifying assets valued at £4m under the old rules would be eligible for either APR or BPR, so would pass to the next generation with no IHT liability. However, under the new rules, only the first £2.5m would get the full relief. The remaining £1.5m would attract only 50% relief, leaving £750,000 exposed to IHT at 40%. This scenario would create a potential tax bill of £300,000. For many families, that could be the difference between keeping a business or farm intact and having to sell assets to meet the liability.
So, if you own agricultural land, a trading business or shares in a qualifying company, and your estate is likely to exceed the £2.5m threshold, reviewing your position as a priority makes sense. Options such as lifetime gifts, trusts and restructuring ownership arrangements may all have a role to play, but these strategies take time to implement effectively.
CGT on business disposals
Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) and Investors’ Relief are two of the most valuable tax reliefs available to people selling a business or qualifying shares. They reduce the rate of Capital Gains Tax applied to eligible gains, historically making the tax bill on a business sale considerably lower than it would otherwise be.
On 6 April 2026, the CGT rate on gains qualifying for these reliefs rose to 18%, up from 14%. It was the second increase in a short period, and it means the relief is becoming progressively less generous.
For anyone in the process of selling a business or planning to do so soon, this change could translate into a larger tax bill than anticipated.
If you’re a business owner thinking about an exit, whether that’s a full sale, a partial disposal or a transfer to family members, it’s worth taking advice now rather than waiting until the transaction is underway.
Dividend Tax
If you hold shares or funds outside of an ISA or pension, the income you receive as dividends is subject to Dividend Tax. On 6 April 2026, the rates increased. Basic rate taxpayers now pay 10.75%, up from 8.75%. Higher rate taxpayers pay 35.75%, up from 33.75%. The additional rate stays unchanged at 39.35%.
For many investors, this will mean a higher tax bill, not because their investments have performed better, but because the rules have changed. For example, someone receiving £10,000 in dividend income as a higher rate taxpayer will now pay £200 more annually than they did last year. That might not sound dramatic in isolation, but compounded across a portfolio over many years, it adds up.
The most straightforward response is to ensure your investments are held inside tax-efficient wrappers where possible. ISAs shelter investment income entirely from Dividend Tax, as do pensions. So, if you hold significant investments in a general investment account, it may be worth reviewing how your portfolio is structured.
VCT relief
Venture Capital Trusts have long appealed to higher earners as a way of reducing Income Tax while investing in smaller, growth-focused companies. One of their main attractions has been the upfront relief of 30% on qualifying investments of up to £200,000 per year.
In April, that relief was reduced to 20%. It’s a less dramatic headline than some of the other changes in this article. But if you have been using VCTs as a regular part of your tax planning, it can change your numbers considerably.
VCTs remain a legitimate tax planning tool. They still offer tax-free dividends and no CGT on disposal. But the reduced upfront relief means the case for using them needs to be assessed afresh. If VCTs feature in your current financial plan, it’s worth revisiting whether the strategy still delivers what you need it to.
The personal tax threshold freeze
While the changes above have attracted much of the attention, the one that will affect the broadest range of people is also the least visible. The ongoing freeze on personal tax thresholds has been extended until 2031.
When thresholds are frozen, but wages, investment returns and property values continue to rise, more people find themselves dragged into higher tax bands without receiving any meaningful increase in their real spending power. This is known as fiscal drag, and it’s a way for the Government to collect more tax without changing the headline rates.
For example, for someone earning £45,000 a year, a modest pay rise of 3% would take their salary to £46,350. In a world where the Income Tax thresholds rose with inflation, their tax position would be broadly unchanged. But with the thresholds frozen, more of that additional income falls into the higher rate band. It means they’ll pay more tax, even though in real terms they’re barely better off.
The same logic applies across the tax system. The Inheritance Tax nil-rate band has sat at £325,000 for years, while house prices have continued to climb, meaning more estates are being pulled into the IHT net each year. Current dividend and CGT allowances mean more investment returns now attract tax than would have been the case a decade ago. And with National Insurance thresholds also frozen, a growing share of people’s salary increases is being absorbed by NI as well.
None of this is accidental. These are deliberate policy choices, and the cumulative effect over a decade of freezes is substantial. The earlier you factor this into your tax planning, the better placed you’ll be.
What can you do about it?
These changes don’t have to be as damaging as they might initially appear. With the right tax planning in place, there are sensible steps you can take to reduce the impact.
Making full use of your ISA allowance, currently £20,000 per year, remains one of the simplest and most effective ways to shelter your investment income and gains from tax. With Dividend Tax rates rising and CGT allowances already significantly reduced, holding investments inside an ISA wrapper matters more than ever.
Maximising your pension contributions is equally important. Pension contributions attract tax relief at your marginal rate, and investment growth within a pension is free from Income Tax and CGT. For higher and additional rate taxpayers, the value of making additional pension contributions as a tax planning tool has arguably never been greater.
If you’re a business owner, it’s worth reviewing how you extract profit from your company. The rise in Dividend Tax rates may affect the balance between salary and dividends that works best for your circumstances. Similarly, if a business sale is on the horizon, the timing and structure of that transaction can have a significant impact on the CGT you’ll pay.
And for those with larger estates, the changes to APR and BPR make early estate planning essential.
How can Glenrose Financial Planners help?
Keeping up with tax legislation is time-consuming at the best of times. When several significant changes arrive together, as they did at the start of this tax year, it can be difficult to assess what the cumulative effect will be on your financial position, let alone what to do about it.
At Glenrose, we help clients in Derby and across the East Midlands make sense of these kinds of changes. Whether you’re an investor reviewing your portfolio, a business owner planning for the future, or just thinking about how to pass on your wealth to the next generation, our advisers can help you understand what the 2026/27 tax changes mean for you and put a plan in place to protect your position. Book a consultation with one of our advisers today to get started.