7 Major UK Tax Changes Confirmed For 2026 That Will Hit Your Investments And Wealth
The UK tax landscape is undergoing its most significant shake-up in a generation, with a series of confirmed policy measures set to take effect for the 2026/2027 fiscal year. For millions of savers, investors, business owners, and property landlords across the UK, the changes—which include massive hikes to Capital Gains Tax (CGT) and strict new caps on Inheritance Tax (IHT) reliefs—represent a critical juncture for financial planning. As of December 22, 2025, these updates are no longer speculation but confirmed government policy, demanding immediate attention to restructure portfolios and assets before the deadlines.
The core intention behind these fiscal adjustments appears to be a drive to increase the tax take from wealth and investment income, rather than just earned income, to stabilise the UK’s long-term finances. These measures, stemming from recent Budgets and legislative acts, will fundamentally alter how wealth is transferred and how investment returns are taxed, making proactive financial advice more crucial than ever.
The Confirmed Tax Hikes and Relief Caps Effective April 2026
The 2026/2027 tax year will introduce a series of challenging new rules that directly impact investment strategies, wealth transfer, and personal allowances. These changes are designed to raise significant revenue for the Exchequer and necessitate a thorough review of your current financial and estate planning arrangements.
1. Capital Gains Tax (CGT) Rates Will See a Major Increase
The most dramatic change for investors is the confirmed increase in the main rates of Capital Gains Tax (CGT) from 6 April 2026. This move will significantly reduce the net profit from selling second homes, investment properties, and substantial shareholdings held outside of tax wrappers like ISAs.
- Basic Rate Increase: The basic rate of CGT is set to rise substantially from 10% to 18%.
- Higher/Additional Rate Increase: The higher and additional rates of CGT will jump from 20% to 24%.
This is a considerable shift. For a higher-rate taxpayer selling an asset that has appreciated significantly, the tax bill could increase by 4 percentage points. This change aims to bring CGT rates closer in line with Income Tax rates, addressing a long-standing point of contention in fiscal policy. Taxpayers should review any planned disposals of assets now to determine if realising gains before the 6 April 2026 deadline is financially advantageous.
2. Investors' Relief Lifetime Limit Drastically Reduced
A significant blow to entrepreneurs and long-term private investors is the reduction of the lifetime limit for Investors' Relief. This relief, which applied to gains on qualifying shares in unlisted trading companies, previously offered a 10% CGT rate up to a lifetime limit of £10 million. From 6 April 2026, this limit will be drastically reduced to just £1 million for all qualifying disposals.
This policy change effectively targets high-value business exits and entrepreneurial gains, making it considerably more expensive for founders and early investors to sell their stakes. The reduction highlights a shift in government focus towards limiting generous tax breaks for wealth creation, putting pressure on business owners to consider their exit strategies well in advance of the deadline.
3. Inheritance Tax Reliefs Capped at £1 Million
For decades, Agricultural Property Relief (APR) and Business Property Relief (BPR) have been cornerstones of UK estate planning, allowing certain assets, such as farms, business interests, and unlisted company shares, to be passed on free of Inheritance Tax (IHT). This is all set to change.
From 6 April 2026, the government will introduce a £1 million cap on the combined value of assets eligible for both APR and BPR. Any value above this £1 million threshold will be fully subject to the standard 40% IHT rate.
- Impact on Estates: Estates containing valuable farms, large trading businesses, or significant shareholdings in unlisted companies will face a substantial increase in their IHT liability.
- Planning Urgency: This is arguably the most critical change for wealthy families and business owners, necessitating immediate estate planning adjustments, including a review of wills, trusts, and asset ownership structures before the cap takes effect.
4. Dividend Tax Rates Will Be Increased
Savers and investors who hold shares outside of ISAs or pensions, particularly company directors who take income via dividends, will face a higher tax burden from the 2026/2027 tax year. The dividend tax rates are set to increase by two percentage points across the board:
- Ordinary Rate (Basic Rate Taxpayers): Rising from 8.75% to 10.75%.
- Upper Rate (Higher Rate Taxpayers): Rising from 33.75% to 35.75%.
- Additional Rate Taxpayers: The rate will also see a corresponding increase.
Furthermore, the Dividend Allowance remains at a low £500, meaning only the first £500 of dividend income is tax-free. The combination of a low allowance and higher rates makes tax-efficient wrappers like Stocks and Shares ISAs even more valuable for generating investment income.
5. New Flexibility for Inheritance Tax Payments
While most IHT changes are restrictive, one measure offers a degree of flexibility for beneficiaries. From April 2026, the option to pay Inheritance Tax by equal annual instalments over 10 years, interest-free, will be extended to cover all property in an estate.
Previously, this interest-free instalment option was only available for certain assets, such as land or a business. Extending this to all property will help executors and beneficiaries manage the IHT liability without being forced into a quick sale of a major asset, such as the family home, to meet the six-month payment deadline.
6. Personal Tax Thresholds Remain Frozen Until 2028
The major personal tax thresholds, including the Personal Allowance and the higher-rate threshold, are not changing in 2026 but are instead confirmed to remain frozen until April 2028. This policy, often referred to as 'fiscal drag', means that as wages increase due to inflation, more people are pulled into paying tax for the first time or are dragged into the higher-rate tax bracket.
- Personal Allowance: The standard tax-free allowance remains fixed.
- Higher Rate Threshold: The point at which the 40% tax rate begins is also fixed.
Although not a direct rate increase, this freezing of thresholds acts as a stealth tax, significantly increasing the tax burden on middle-income earners over time. Some longer-term freezes are even extended until April 2031.
7. Savings Income Basic Rate Tax Rises
For individuals with significant savings income outside of ISAs, such as interest from bank accounts or bonds, the tax liability is also set to increase. From 6 April 2026, the savings basic rate will rise to 22%. This follows the trend of increasing tax on unearned income, making the use of the Personal Savings Allowance (PSA) and tax-free savings vehicles like Cash ISAs and Lifetime ISAs more important for managing overall tax efficiency.
Navigating the New 2026/2027 Fiscal Environment
The raft of changes confirmed for the 2026/2027 fiscal year signals a decisive shift in UK fiscal policy, moving towards higher taxation on wealth and capital. The reduction in the CGT Annual Exempt Amount (down to £3,000 for 2025/2026) combined with the rate hikes means that even modest investment gains will be taxed more heavily.
Furthermore, the government is also implementing major changes to the UK Self-Assessment rules by 2026, impacting everyone who files a tax return, receives rental income, or runs a side business. These administrative and structural reforms, alongside the tax rate and relief changes, create a complex new environment for financial compliance and planning.
To mitigate the impact of these changes, taxpayers should focus on:
- Maximising ISA and Pension Contributions: Utilising tax-free wrappers remains the most effective way to shield investments from the forthcoming CGT and dividend tax increases.
- Reviewing Estate Planning: The £1 million cap on BPR/APR requires an immediate review of how business assets and agricultural land are structured and owned to minimise IHT exposure.
- Accelerating Disposals: Consider realising substantial capital gains before April 2026 to take advantage of the current, lower CGT rates.
These confirmed updates represent a significant increase in the complexity and cost of wealth management in the UK. Proactive consultation with a tax professional is essential to ensure compliance and to implement tax-efficient strategies before the 2026 deadlines.
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