By Stephen Rankine, Financial Adviser, Blevins Franks.
The 2026/27 UK tax year ticked over on 6 April 2026, with most thresholds, allowances and rates unchanged. But the countdown has now started to April 2027, when pensions will become subject to inheritance tax for the first time.
Whether you are a UK resident or a British expatriate with UK assets, keeping up with tax reforms is essential. It is important not only to understand the changes taking effect this year, but also to plan for measures already scheduled for the coming years. Reviewing your tax and wealth strategy early can help protect your assets – and your family – from avoidable tax exposure.
Income tax thresholds and rates – no changes
The income tax personal allowance and thresholds are frozen until April 2031. The personal allowance therefore remains £12,570. For higher earners, it is tapered by £1 for every £2 of income above £100,000 until it is reduced to nil.
The income tax thresholds and tax rates for non-savings non-dividend income are unchanged for England, Wales and Northern Ireland taxpayers:
| Income tax 2026/27 | ||
|---|---|---|
| Basic rate | Up to £37,700 | 20% |
| Higher rate | £37,701 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Scotland has different rates and income bands, and there the lowest thresholds have increased a little.
Savings income – higher rates for dividends
The basic and upper rates of tax on dividend income increased by 2 percentage points from 6 April. A similar tax increase on savings income will take effect a year later.
| Dividends tax rate increases effective 6 April 2026 | Savings tax rate increases effective 6 April 2027 | |
|---|---|---|
| Basic rate | 8.75% to 10.75% | 20% to 22% |
| Higher rate | 33.75% to 35.75% | 40% to 42% |
| Additional rate | Remains 39.35% | 45% to 47% |
The allowances for personal savings remain unchanged, as does the £500 dividend allowance.
Capital gains tax (CGT)
There are no changes to the capital gains tax rates and allowance this year.
| Income tax band | Tax rate on residential property & other assets |
|---|---|
| Basic rate | 18% |
| Higher or additional rate | 24% |
| Trustees or executors | 24% |
The capital gains tax-free allowance is £3,000 per annum for individuals and £1,500 for trusts.
However, for those claiming Business Asset Disposal Relief (BADR) or Investors’ Relief (IR), capital gains tax has increased from 14% to 18% from 6 April.
Pension allowances 2026/27
The main pension allowances remain:
- Money purchase annual allowance minimum: £10,000
- Annual allowance: £60,000
- Lump sum allowance: £268,275
- Lump sum and death benefit allowance: £1,073,100
- Overseas transfer allowance: £1,073,100
Inheritance tax (IHT) – new limits on tax reliefs
Inheritance tax rates (40%, or 36% where 10% is left to charity) and allowances are all unchanged for 2026/27. The main nil-rate band has been frozen at £325,000 since 2009. If it had risen in line with inflation, it would be around £517,000 today.
For estates claiming Agricultural Property Relief (APR) and Business Property Relief (BPR), since 6 April 2026, the 100% rate of relief is restricted to the first £2.5 million of combined agricultural and business property. Values above this receive 50% relief. These are individual reliefs and can be transferred between spouses.
The rate of Business Property Relief on AIM-listed shares is now also limited to 50%.
Pensions and IHT – all change from April 2027
The biggest change is yet to come – and will be felt by hundreds of thousands of British families.
To date, pensions are exempt from inheritance tax. While beneficiaries may pay income tax on unused pension benefits, they are protected from IHT. But from April 2027, any unused funds and death benefits will form part of your estate for IHT purposes.
Your family could now pay substantially more inheritance tax overall than you previously anticipated. Coupled with the potential income tax applied when your heirs take the death benefits, total tax paid on inherited pensions can reach 67%.
There is less than a year for you to review and adjust your wealth management. Confirm how this reform will affect your heirs and explore what steps you can take now to reduce the impact on your loved ones.
For example, if you had planned to withdraw retirement income from your savings and investments initially, leaving your pension funds until your later years, you may wish to reconsider the order.
Also, take a fresh look at your estate planning to establish if you can reduce your tax liability. Are you using your £3,000 annual gift exemption? Regular gifting can help reduce a future IHT bill. Should you consider a Potentially Exempt Transfer (PET)? Take personalised, specialist advice – there may be opportunities you are not aware of, while others may not be suitable for your family situation and objectives.
British expatriates are also affected by this reform since UK assets are always liable for UK inheritance tax, regardless of how long you live overseas.
Some expatriates are choosing to move their pension out of the UK, even if it incurs a tax charge, as the IHT saving would be worth it. However, this would not be a feasible or suitable option for many, but if you have UK property and/or investments, you could dispose of them instead. This would reduce your IHT liability, and can you can reinvest the proceeds more tax efficiently outside the UK, to benefit from the tax regime in your country of residence.
Whatever your situation, we recommend you seek advice now. The countdown has begun, and reviewing and adjusting your assets can be a lengthy process, especially for pensions.
Reviewing your financial planning
The start of a new tax year is an ideal moment to take stock of your overall financial position. Now is the time to make sensible adjustments over the coming months so you are well‑placed for the significant reforms arriving in April 2027 and beyond.
Given the breadth of UK tax changes over recent years and the complexity they introduce, obtaining personalised, professional guidance is increasingly important. Understanding how the reforms apply to your situation, and how best to position your assets, can help you avoid unnecessary tax exposure and protect your family’s long‑term interests.
Blevins Franks provides integrated and highly tailored wealth management solutions covering tax planning, estate structuring, investment management and pensions – designed to support your financial wellbeing today and give you confidence about the future.
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual should take personalised advice.
Blevins Franks Wealth Management Limited (BFWML) is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists. Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of trusts, retirement schemes and companies. This promotion has been approved and issued by BFWML.