By the time the Easter weekend comes to a close, a flood of new tax measures will be in place – changes that could impact your financial planning and retirement strategy.
With a new tax year, comes new rules. This means that from 6 April, many new measures will be taking effect – likely changing the course of your financial planning strategy. From changes to taxation of employees, the implementation of the Government’s ‘Make Tax Digital’ scheme, and changes to Inheritance Tax (IHT), the incoming changes will trigger millions of people across the country to rethink how they plan for both themselves and their loved ones. So, as we enter the new tax year, what exactly is changing? Here, we break down some of the most significant changes.
Please note: Most changes will come into effect on 6 April – but some will have already changed on 1 April.
‘Making Tax Digital for Income Tax’ scheme
Residential property owners and sole traders will be subject to digital record-keeping from 6 April – if their annual trading and/or rental income is over £50,000. This marks the first phase of the Government’s ‘Making Tax Digital for Income Tax’ scheme, which is being staggered across a three-year period.
For those affected, this will require setting up a compliant digital accounting system which could incur up front costs and ongoing fees. It will also require records to be provided up to five times a year (four quarterly submissions, plus a balancing submission once a year).
Increase in dividend tax
From 6 April, dividend tax rates will increase, with the Basic Rate (BR) rising to 10.75% and the Higher Rate (HR) to 35.75%, while the Additional Rate (AR) remains unchanged at 39.35%. This will affect most dividend earners, including company directors and investors relying on dividend income. Tax is applied after a £500 allowance, using standard income tax thresholds to determine the rate. This means that individuals relying on dividends for income will pay more tax, reducing any post-tax income.
Inheritance Tax (IHT) on family business
Stemming from the Finance Act 2026, Inheritance Tax (IHT) relief on agricultural and business assets will be capped at £2.5 million per person (£5 million for couples), combining limits for Agricultural Property Relief (APR) and Business Property Relief (BPR). Any value above this limit receives 50% relief, and from this date Alternative Investment Market (AIM) listed shares are limited to 50% relief regardless of value.
This means that anyone with large estates or significant business assets could face higher IHT bills than anticipated – and planning can help manage this cap effectively.
Changes to VCT (30% to 20%)
From April, thresholds for the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) will increase, allowing companies to have larger gross assets and raise more funds annually and over their lifetime, though Northern Ireland companies are excluded. However, VCT income tax relief will fall from 30% to 20%, which makes the net return from VCT investments decrease, whilst increasing revenue for the Government.
Increase in state retirement age
The state pension age will gradually increase from 66 to 67 between April 2026 and April 2028, off the back of the Pensions Act 2014. This change will inevitably impact how people plan for retirement, due to the potential reduction in their pension income as they approach retirement age.
Increase in BADR
Business Asset Disposal Relief (BADR) is a measure that typically enables business owners to pay lower capital gains tax (CGT), when selling a business or shares. However, from 6 April, BADR will rise from 14% to 18% – following a rise from 10% to 14% in April 2025. This means that timing sales, planning cash flow, and considering alternative tax strategies will be key for business owners.
Carried interest under income
From 6 April 2026, carried interest will be taxed as trading profit – subject to income tax and National Insurance – rather than capital gains tax (CGT). Qualified carried interest held for a minimum period will benefit from a reduced top rate of 34.075% (rather than the full rate of up to 47%), immediately increasing tax obligations.
Now is the time to act
With these significant changes coming into effect, from the rise in the State Pension age to adjustments in dividend tax, Inheritance Tax (IHT), and Business Asset Disposal Relief (BADR), it’s clear that the landscape for financial planning is shifting as we enter the new tax year. Whether you’re a business owner or planning for retirement, these measures could materially impact your strategy and future security without early financial planning.
[i] If you’re affected – or simply think you might be – now is the time to act. Our team of independent, chartered experts are here to help you navigate the new rules, optimise your planning, and ensure your financial goals remain on track. Call 03300 564 446 to directly speak with a financial expert, or get in touch via our contact form.
