New year, new rules: key tax planning opportunities for the year ahead

Make use of available agricultural or business inheritance tax reliefs

Currently, qualifying agricultural or business assets can receive up to 100% relief from IHT under agricultural property relief (APR) or business property relief (BPR) as applicable. From 6 April 2026 however, the value of agricultural and business assets that can benefit from APR or BPR at 100% relief will be capped. Despite widespread challenges to these reforms and a government consultation, the original proposals remain largely untouched, however, the Chancellor announced in this year’s  Autumn Budget that any unused APR/BPR allowance will be transferable to a surviving spouse (as is the case with the IHT nil rate band) which is a welcome concession. Furthermore, it was announced just before the Christmas recess, that the 100% allowance would be set at £2.5 million rather than the original figure of £1 million. While any further last-minute changes to the proposed legislation cannot be ruled out, if you own qualifying agricultural and/or business assets, it would be prudent to consider what steps you could take to mitigate the impact of the changes due to take effect in April 2026. For further detail please see our article: Festive cheer for farmers and business owners as Government increase APR and BPR limit to £2.5m

Selling or giving away assets

Capital gains tax (CGT) may be due when you dispose of a chargeable asset – by way of a sale or simply making a gift. In the months leading up to the Autumn Budget, there were rumours of further increases to the CGT rates as well as capping or restricting the current “principal private residence” relief and removing the CGT free uplift available on death.  The Government chose not to proceed with any changes and so CGT rates will remain at 18% and 24% for 2026/27 with the annual allowances for individuals and trustees staying at £3,000 and £1,500 respectively. Clients can continue to realise substantial gains on their main home, often a key source of retirement funding or care-cost planning, without creating a CGT liability and for those with multiple properties, the ability to make or potentially vary a main home nomination remains an important planning tool.

Passing assets to the next generation

There was significant speculation that the Government might introduce a range of reforms to the current gifting regime, such as placing a cap on lifetime gifts, extending the period a donor must survive a gift from 7 to 10 years and removing taper relief. None of these transpired and so there are still options available if you wish to pass on assets during lifetime.

If you wish to minimise the value of your estate for IHT purposes whilst retaining an element of control over your assets, consider gifting assets to a trust (of which you could be a trustee). You can currently gift up to £325,000 to a trust without incurring an IHT charge.

You can also make use of your IHT annual exemption (currently £3,000) to gift assets free from IHT. If you did not use your annual exemption in the last tax year, you can use it in this tax year instead to give you a total allowance of £6,000 to make gifts exempt from IHT. Although outright gifts are not immediately chargeable to IHT in any event, making use of the annual exemption means that the gift will not sit on your “seven-year clock” and become chargeable to IHT if you fail to survive it by seven years. Other reliefs you can use to make gifts free from IHT include the small gifts exemption of £250 per person (up to a maximum of ten people per year) and wedding gifts to relatives (a gift of £5,000 to a child, £2,500 to a grandchild or £1,000 to anyone else).

In light of the Chancellor’s decision in the 2024 Autumn Budget for unused pension funds and death benefits to be subject to IHT from 6 April 2027, along with the announcement in the 2025 Budget that the IHT nil rate band will remain frozen at £325,000 until 2031, bringing more estates within the IHT net, it is more important than ever for clients to utilise the current gifting regime as part of their lifetime planning.

Cash ISA allowance

The annual cash ISA limit will be reduced to £12,000 from April 2027 for those aged under 65. There is no change to the annual contribution limit for stocks and shares ISAs or to innovative finance ISAs – these remain at £20,000.

While this change does not affect an individual’s overall annual contribution limit of £20,000, it does mean that clients who would like to maximise their Cash ISA allowance only have a limited amount of time left in the current 2025/26 tax year and then the 2026/27 tax year to do so.

The Chancellor also announced that the tax on income earned from property, dividends and savings earned outside of an ISA will increase. The basic and upper rates of tax on dividend income will  rise from 8.75% to 10.75%, and from 33.75% to 35.75% from April 2026. The additional rate will remain unchanged at 39.35%. The basic, higher and additional rates of tax on savings and property income will also increase by 2% but these take effect from April 2027.

As clients navigate an increasingly challenging environment of frozen income tax thresholds and increasing tax rates on dividend income and savings income, investing funds into a tax-free ISA wrapper remains a highly efficient planning tool.

How we can help

If you would like to discuss any of the tax planning tips above, or for any estate planning advice, please do not hesitate to contact a member of the Private Client team.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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   • Harry Osborne

   • Solicitor
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   • Caroline Miller

   • Partner
   • Private Client

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