Tax Planning for 2026/27

Personal Tax Planning

As we start another tax year, you may wish to take advantage of the following tax planning opportunities. We would be pleased to discuss these with you, either by face-to-face meeting, online meeting or a phone call.  

To maximise the opportunities available to you, you should consider the following that relate to your personal circumstances: 

Capital Gains Tax Annual Exemption

The Annual Exemption for each individual will remain at the current rate of £3,000 from 6th April 2026. Transfers between spouses are exempt from capital gains tax. 

CGT is charged at 18% for gains falling into the basic rate tax band and 24% for gains in the higher and additional rate tax bands. 

For gains where Business Asset Disposal Relief can be claimed, the rate of CGT will increase from 14% to 18% from 6th April 2026. 

Pension Contributions

Most people can make annual pension contributions of £60,000 gross (or £48,000 net) before incurring any tax charge. This limit includes all pension contributions, including those made by an employer. Unused allowance from the previous three years can be utilised. If your total income exceeds £200,000, the annual allowance may be tapered to £10,000.  

Personal contributions potentially save tax by extending the tax bands, but tax relief is only available up to the amount of earnings received (or £3,600 gross if income is lower). 

Personal pension contributions can usefully be used to ensure your total income is £100,000 or less to avoid withdrawal of the personal allowance. Company contributions result in a corporation tax saving. 

Dividends

The dividend nil rate band is currently £500.  You may wish to consider voting a dividend before 5th April 2026 to take advantage of this nil rate band.  You should also consider whether you can vote a dividend to utilise your basic rate tax band where dividends are taxed at a rate of 8.75% (this rises to 33.75 for a higher rate tax payer and 39.35% for an additional rate tax payer). It is advisable to ensure that your total income does not exceed £100,000 in order to retain the full personal allowance. 

Income Tax Rates & Personal Allowance

Income up to £50,270 is currently taxable at the basic rate of tax. The 45% additional rate of income tax applies to income over £125,140. Where gross adjusted income exceeds £100,000, the personal allowance starts to taper and is lost altogether when income reaches £125,140.  Income between £100,000 and £125,140 is effectively taxable at the rate of 60% and it is therefore tax-efficient to keep your adjusted total income at £100,000 or less. 

• Company Cars

Some vehicles, such as vans and electric (zero emission) vehicles, result in 100% capital allowances to reduce a company’s corporation tax liability or sole trader/partner’s income tax liability. The benefit in kind for directors and employees on a vehicle with zero emissions is currently 3% but rises to 4% from 6th April 2026. 

This is a complex area and advice should be taken before purchasing a vehicle to ensure that you are fully aware of the tax implications for your business and also the taxable benefit on the employee or director. 

The flat rate van benefit charge will increase from £4,020 to £4,170 from 6 April 2026. 

Making Tax Digital

Making Tax Digital (MTD) is a new way for sole traders and landlords of rental property to report their income and expenses to HMRC.  From 6th April 2026, those with annual income from self employment and rental property of £50,000 or more will need to comply with MTD.

Those affected will need to keep digital records and send quarterly reports to HMRC.  We are able to assist you with this and will contact you if it applies to you. 

Property

Tax incentives for owning furnished holiday lettings (FHLs) were abolished from 6 April 2025 and FHLs are now treated in the same way as other rental properties. 

Where a rental or second property is jointly owned, you should consider the split of profits and beneficial ownership to maximise use of the personal allowance, basic rate tax band and capital gains tax annual exemption. For a married couple, a split other than 50/50 will require a deed or declaration of beneficial ownership and the submission of form 17 to HMRC. 

Stamp duty is currently payable by UK residents on transfers of residential property with a value in excess of £125,000.  Stamp duty for second or rental properties will incur a 5% surcharge. 

Tax-Efficient Investments

Consider tax efficient investments such as Enterprise Investment Schemes, Seed Enterprise Investment Schemes and Venture Capital Trusts. These can result in income tax and capital gains tax savings. 

A basic rate tax payer can receive interest of up to £1,000 and a higher rate tax payer £500 before paying any income tax. ISA’s are tax free and an annual investment of up to £20,000 can currently be made. It is important to consider making use of ISA’s to minimise the tax charge on interest.

Gift Aid Donations

If you are a taxpayer, making charitable donations under Gift Aid will have the effect of extending your basic and higher rate tax bands. This can also be used to minimise the loss of the personal allowance. Care should be taken if making Gift Aid donations when you are not a tax payer, because this could result in a tax charge. 

Inheritance Tax

The current inheritance tax nil rate band remains at £325,000.  Where the home is passed to direct descendants, there is a further nil rate band of £175,000. There is therefore potential IHT relief on up to £1 million for the joint estate of a married couple.  Restrictions apply where estates are valued at more than £2 million. 

Transfers can be made between spouses without IHT consequences. You are able to make annual gifts of £3,000 and small gifts of £250 per person without any IHT implications. You may also be able to make regular gifts out of income.  

If you wish to minimise the value of your estate for IHT, you could consider gifting assets, bearing in mind that you must survive 7 years after the date of the gift to ensure that the assets do not form part of your estate. There may also be capital gains tax implications of making gifts.  Another option may be to transfer assets into a trust and we can provide advice on this. 

Please take our advice before making any transfers or gifts. 

Married Couples & Civil Partnerships

A spouse or civil partner who is not liable to income tax above the basic rate is able to transfer some of their personal allowance to their spouse or civil partner provided the transferee is also not subject to tax above the basic rate tax band. This produces a potential tax saving of up to £252. 

Married couple’s allowance is available where one partner was born before 6 April 1935.  If MCA is claimed, the marriage allowance transfer is not also available. 

Tax bills can be minimised where spouses can distribute income between them to maximise use of the personal allowance, basic rate tax band, savings allowance and dividend allowance. Gifts between married couples are exempt from capital gains tax and inheritance tax.  Please take tax advice from us before making any transfers. 

Child Benefit

The income threshold for the High Income Child Benefit Charge is currently £60,000.  If one partner earns in excess of this, Child Benefit payments are clawed back at a rate of 1% for every £200 income above £60,000 to the upper threshold of £80,000.  The tax charge applies to the higher earner in the household, regardless of which partner receives the Benefit. 

The above information is based on current tax legislation, which is subject to change. Some tax rates may differ for residents of Scotland.

Please get in touch to book your FREE Tax Planning consultation.