New year, new rules: Financial planning in changing times
New year, new rules: Financial planning in changing times
Financial policy never stands still. Every budget brings with it a slew of headline changes, from spending pledges to taxation tweaks.
And even when things are fixed or frozen, they can trigger important knock-on effects or shifts. Take as an example the government’s recent decision not to make adjustments to personal allowances and income tax thresholds until at least April 2031 – a ‘move’ that will directly result in more people paying more tax over the coming years.
For individual savers and investors, keeping tabs on this shifting landscape can be quite a challenge, particularly when announced measures are slated to be introduced at different points in the future.
So, with a new calendar year stretching out before us, and with a new tax year just months away, we provide an overview of key changes set to come into force in the short and medium term.
Savings and investments
One important adjustment being introduced at the beginning of the 2026/27 tax year on 6 April is a 2% increase to dividend tax rates for basic-rate and higher-rate taxpayers.
From this point, investors with assets outside the tax-free wrapper of an Individual Savings Account (ISA) can expect to pay dividend tax at 10.75% and 35.75% respectively. Additional-rate taxpayers will continue to pay dividend tax at 39.35%.
The dividend allowance also remains unchanged at £500 (having been previously halved in both 2023 and 2024).
Business reliefs
The main rates of capital gains tax (CGT) might not be subject to change in April 2026, but from this point there will be a change to the rate on gains that qualify for Business Asset Disposal Relief (BADR - previously known as Entrepreneur’s Relief) and Investors’ Relief (IR).
This will rise from 14% to 18%, and follows a previous increase from 10% to 14% on 6 April 2025.
BADR reduces the amount of CGT due when selling a business or business assets. IR meanwhile is designed to support investment in unlisted trading companies by those not actively involved in the business. Specific eligibility criteria must be met for BADR and IR to apply.
Separately, the upfront income tax relief available on Venture Capital Trust (VCT) investments will fall from 30% to 20% from 6 April 2026. This applies on VCT investments up to £200,000, representing a £20,000 fall in maximum relief available.
Inheritance tax
In the area of reliefs, another significant shift coming in from 6 April 2026 is the much-publicised change to Inheritance Tax (IHT) for assets that qualify for Business Relief and Agricultural Relief.
From this date, the 100% IHT exemption will now apply to the first £2.5 million of qualifying assets. The remainder will then be subject to 50% relief on the full 40% rate, effectively resulting in IHT at 20%.
From 6 April 2026, the 50% rate of IHT relief will also apply to unquoted shares, which had previously benefited from 100% relief. Unquoted shares are those listed on unrecognised exchanges, which includes the Alternative Investment Market (AIM).
When originally announced in the 2024 Autumn Budget, the cap for the total value of assets qualifying for 100% agricultural property relief or 100% business property relief or both was initially set at £1 million. The decision to increase it to £2.5 million was one of several updates made by the government in December 2025 following vocal opposition to the plans.
On the horizon
Anyone affected by these incoming changes to IHT will be keenly aware of the importance of updating their plans to ensure estates are structured as tax-efficiently as possible for the benefit of future generations.
Looking slightly further ahead, many more people are set to take a similar approach as new rules relating to IHT and pensions come into effect from 6 April 2027.
From this date, most unused pension funds and death benefits are scheduled to be included within an individual’s estate and, therefore, to come under the scope of IHT on their death.
This marks a significant departure from the current status quo, where pensions can be passed on free from IHT. As a result, receipts from IHT, which are already on course to hit record levels, are expected to raise more than £14 billion in 2029/2030.
Understanding the impact
With the clock ticking, individuals must therefore seek to understand how this and other incoming policy changes are set to impact their personal situations and financial plans.
Accessing regulated advice from a professional financial advisor can provide invaluable support in this challenge, helping you understand all the many variable factors at play and deciding how best to proceed.
It can enable you to formulate a coherent, holistic plan that incorporates everything from business assets to savings, investments and pensions, while also considering your ambitions for later life and, ultimately, your legacy.
The new year will always herald change in the permanently shifting world of financial policy, but it also provides a valuable platform to stop, take stock and ensure your finances are fit for the future.
The information supplied is based upon our understanding of current UK law and HM Revenue and Customs (HMRC) practice. Tax law and HMRC practice may change from time to time. The value of any tax relief will depend on the individual circumstances of the investor. This is our understanding of the proposals so far and these may be liable to change as further regulations are introduced. The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Wealth Management or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication. You should be aware that the value of an investment can fall as well as rise and that investors may not get back the amount they invested. Venture Capital Trusts (VCT) are a high risk investment and you are unlikely to be protected if something goes wrong. In addition, because AIM-listed companies tend to be smaller, more volatile and subject to less stringent checks than those quoted on the main London Stock Exchange, the risks are greater. Links to related sites have been provided for information only. Their presence on this blog does not mean that the firm endorses any of the information, products or views published on these sites. The Financial Conduct Authority does not regulate tax planning or trusts.