In a busy year for policy and tax changes, here’s what you need to know

The biggest headline change capturing the industry’s attention is the impact of bringing unused pension funds into the scope of Inheritance Tax, coming to a pension fund near you in Spring 2027.

As we move further into the current year, there are plenty of other policy and regulatory dates worth keeping front of mind and in your calendar which will also shape the road ahead in 2026 and beyond.

We take a look in more detail at what’s coming down the line and the impact these changes may have on clients.  

CGT and Employee Ownership Trusts

What’s changing and when?

As part of the 2025 Autumn Budget, Rachel Reeves announced that qualifying disposals from employee ownership trusts (EOTs) would have Capital Gains Tax (CGT) relief cut from 100% to 50%. This became effective immediately following last year’s Budget and will be relevant for advisers with any clients who are business owners either considering, or going through, succession planning.

Even with these CGT changes, EOTs will continue to be a tax efficient option for selling a business and, depending on the clients’ preferred succession path, they may still be the best route forward.

Dividend income 

What’s changing and when?

As the current tax year end approaches there are changes to income tax on dividends, due to come into effect on 6 April 2026.

The ordinary rate has seen a 2pp. rise to 10.75% with the upper rate rising by the same to 37.5%. The additional rates remain unchanged at 39.35%.

Non-resident dividend tax credit 

What’s changing and when?

Non-resident dividend tax credit is set to be abolished for non-doms with UK income, bringing it in line with how UK residents are treated. Introduced on April 6, this will be another consideration for advisers with non-resident clients in the run up to the current tax year end.

Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) 

What’s changing and when?

The income tax relief available to investors on VCT will fall from 30% to 20%, from the start of the 2026/2027 tax year.

Meanwhile the gross assets limit for companies held in a VCT will rise to £30m before and £35m after share issuance, allowing VCTs to invest in scaling, or larger, businesses. Moreover, the annual investment limit is to climb to £10m, or, for knowledge-intensive outfits, £20m.

Agricultural property relief (APR) and Business Property Relief (BPR)

What’s changing and when?

Changes will come into effect on both APR and BPR during 2026, following on from Government announcements originally made in 2024. The original plan had been to cap the 100% relief rate on APR and BPR at £1m from April 6 but the Government has since changed the legislation, so the cap will be set at £2.5m.

For married couples or civil partners, this means that agricultural and business assets can be passed on up to the value of £5m without incurring IHT.

Earlier proposals had also hinted at restrictions for certain property types, such as pubs, but the government has relaxed its position on this, pending final guidance.

Restrictions on Salary Sacrifice for pensions contributions

What's changing and when?

From April 2029, the amount that an employee can contribute to their pension scheme without paying National Insurance Contributions (NICs) will be limited to £2,000.  Anything over this will still be exempt from Income Tax (as per existing rules) but both Employee and Employer NICs will be due on any amount in excess of £2,000.  This is just over £160 a month,  and with the current auto enrolment rates set at 8% could impact anyone earning £25,000 or over (depending on whether the employer makes the contributions based on total or qualifying earnings).  For clients wishing to bolster their pension funds over the next couple of years, especially for those who may have gaps in pension earnings due to taking time out to care for children or elderly relatives, making use of salary sacrifice schemes may form a crucial part of pension planning.

IHT on pensions

What’s changing and when?

The introduction of IHT on unused pension funds in 2027 is too big for us not to mention at all. The final legislation is still being drafted so what action, if any, can the advice industry take during this period of limbo while such a big change is on the horizon?

Practical steps to take now 

Advisers are already turning to mechanisms such as gifting, life insurance and trusts ahead of the legislation coming into effect. Another practical step that is somewhat overlooked but will only become more important following the introduction of the new rules, is an Expression of Wish form.

Often an Expression of Wish form doesn’t get changed for a long time, if at all, after it is first created by an adviser and client. Given that the IHT changes are likely to make the death benefits process more complicated, it is vital that Expression of Wish forms are kept up to date to reflect a client’s current circumstances and wishes.  Not doing so runs the risk of further delays and stress when families are dealing with a loved one’s estate during a period of loss.

More change to come?

With all this to navigate, it’s shaping up to be a busy year or so ahead for advisers and clients. While some issues such as IHT and pensions may continue to dominate headlines, it’s important to remember that changes which may seem smaller in the grand scheme of things can still have a big impact for an individual client, depending on their circumstances.

It may be too early for anyone to say what’s likely to come up in the Budget later this year but with the level of speculation reaching new heights in the run up to the Chancellor’s announcement last November, hopefully this one will be quieter for personal finance and pension policy. 

Famous last words…