As the tax year end approaches, it’s worth remembering that a bit of forward planning can make a big difference to your personal tax position.

With many allowances fixed and thresholds frozen - alongside some significant tax changes – it’s worthwhile considering your position before 5 April 2026. This could help avoid any surprises and might allow you to reduce your income tax bills. Here are some things to think about:

1. Making Tax Digital for Income Tax Self-Assessment

New quarterly filing requirements for income tax come into effect from 6 April 2026. This means sole traders and landlords with income of over £50,000 (before expenses) will be required to maintain digital records and file quarterly returns with HMRC. This is one of the biggest shake-ups to tax administration for individuals for over 30 years. If affected, it is vital that you review your position now to ensure you are ready for the new filing requirements.

2. Inheritance Tax rule changes

Big changes take effect from 6 April for many of those who hold qualifying business and agricultural assets.  Previously, an unrestricted amount of 100% IHT relief was often available for these assets.  From April 2026, this will be restricted to assets up to £2.5m, with an effective rate of 20% IHT due on the excess. It is critical that planning is considered to reduce exposure in this new regime.

Further changes are on the horizon with pensions being brought into the IHT net from April 2027.  Even if you are unaffected by the rules directly, it is still worth reviewing your IHT exposure to consider what steps you could take to improve the position.

3. New dividend rates and profit extraction for business owners

Dividend rates will increase from 6 April, with the basic rate of 8.75% increasing to 10.75%, and the higher rate increasing from 33.75% to 35.75%. Those with significant dividend income should note the top rate of dividends remains at 39.35%. If business owners are considering paying any dividends, it may be worthwhile doing this before the rates increase.

This will also impact directors with company loans which are not repaid 9 months after the accounting year end as “section 455” charges increase from 33.75% to 35.75%.

Business owners should consider their income tax position on the money they draw from companies. By considering their income profile, a balance of salary, dividends and pension contributions can allow a more tax efficient basis of receiving funds from the company.

4. Capital Gains Tax and Business Asset Disposal Relief

For those selling business assets that qualify for Business Asset Disposal Relief, it may still be possible to make use of the 14% rate before the rise to 18% on 6 April. Where plans to dispose of qualifying assets can be accelerated, this may result in a tax saving.

The tax-free capital gains annual allowance is now only £3,000, but this makes it even more important to ensure this is used each year. Also, review any capital losses that can be realised, particularly if you are expecting to realise gains on an asset this tax year – or have already.

5. Pension contributions and ISAs

Pension contributions can usually be made up to a total of £60,000 per year.  These can provide significant tax savings, both up-front and in the future.  This limit is a total for employer and employee payments - note that for personal contributions the contribution plus 20% tax relief often counts towards the annual allowance. Any unused allowances for the previous three tax years can be rolled forward in many situations. It is sensible to review allowances to ensure any prior year allowances are not lost at the tax year end.

Caution should be taken by higher earners (income of £200,000+) as allowances can be tapered, which will restrict contributions that can be made without incurring unnecessary tax charges.

For those with no earnings, personal contributions can be made but these are capped at £2,880 (which is grossed up to £3,600 with tax relief).  This can be worth considering for children or grandchildren.

You can pay up to £20,000 into an ISA each year to take advantage of their tax-free wrapper. Limits are different for Junior ISAs (£9,000). You can flexibly invest in a combination of cash only or stocks and shares up to the annual limit.

6. Manage your income level - £100,000+

Once your taxable income reaches £100,000, you start to lose your personal allowance on a tapered basis. This can give an effective tax rate of up to 67.5% when income is between £100,000 and £125,140 - with national insurance contributions also being due in addition to income tax where it is made up of salary or bonuses.

Personal pension contributions, charitable donations under Gift Aid, or deferring income to the next tax year (if possible) can all help reduce the tax impact.

7. Manage your income level - Child Benefit Charge

The High-Income Child Benefit charge applies from £60,000 with the benefit fully withdrawn at £80,000. The charge applies to the higher-earning partner in a household, regardless of who receives the benefit, and can result in significant marginal tax rates for those with income between £60,000 and £80,000.  Similar steps can be taken as above to keep within the charge threshold.

8. Tax efficient investments

Up to 30% income tax relief (and capital gains tax reliefs) are available for EIS/SEIS/VCT investments which can significantly reduce the tax payable. The timing of these investments is often key to maximise the tax savings - and always note that these shares usually carry a high level of investment risk.

9. Consider who holds income producing assets

With income tax thresholds freezing and income tax rates increasing, making sure that income producing assets are held to make use of the tax bands can be important, particularly for married couples.  For wider families and businesses, different ownership structures may provide for some tax efficiencies. The use of limited companies, partnerships or indeed trusts can give flexibility of how assets are held and how income is distributed.

For existing trusts and family companies, considering making distributions before the tax year end, particularly where it will benefit from a recipient’s lower tax rate bands.

10. International aspects

Following significant alterations to the rules surrounding non-domiciled individuals, and other changes affecting those that have an international dimension to their affairs, it is critical that updated advice is obtained by those affected. These changes can have a significant impact on UK tax liabilities now and in future, and we’ll be providing a detailed note on this soon.

Get in touch

With there being continued focus by governments on generating revenues by increased taxation, it makes sense now more than ever to ensure appropriate steps are taken to reduce any unnecessary tax exposure. Please get in touch with me here, or another member of our Private Client Tax team if you think you are affected by any of these points or have any other questions on your tax affairs.