1. Frozen tax thresholds: how to reduce the impact of fiscal drag
Tax thresholds remain frozen until the 2030/31 tax year. As income rises with inflation, more of your income may fall into higher tax bands even though the income rates themselves and your spending power have not increased.
What this means
Actions to consider
Time income and gains carefully
In advance of the end of the tax year, 5 April, each year consider reviewing:
Whether you have used your capital gains tax (CGT) allowance.
Whether Bed and ISA transfers (when you sell your investments and buy them immediately in a tax-sheltered account) would help shelter future growth and income from tax.
Opportunities to offset gains with any crystallised losses (these would be your actual gains or losses at the point of sale).
2. Pensions: take advantage of today’s rules while they remain generous
Pensions continue to be a tax‑efficient way to invest for later life, especially for high earners.
Key points for 2026
Planning implications
- Make pension contributions while current salary sacrifice rules are still favourable.
- Model how the 2029 changes could affect your long‑term plan.
- Rethink the ‘pension last’ mindset – you may need to review your withdrawal strategy – pensions may no longer always be the last pot you access.
- Check and review beneficiary nominations and drawdown or lump‑sum options regularly.
3. Inheritance tax (IHT): reduce the effects of frozen thresholds
With the nil‑rate band frozen, more estates are being drawn into IHT due to rising asset values. Investors with more than £1 million should treat IHT planning as ongoing.
Key areas to review
- Estate structure
- Understand how pensions (post‑2027), property, business assets and investments interact. Note how the Residence Nil‑Rate Band may taper for larger estates as a result of these changes.
- Wills and nominations
- Review these regularly to ensure they still reflect your wishes.
- Lifetime gifting
- Use annual exemptions and consider gifts from surplus income. This can be a complex area and a financial planner could help.
- Trusts and Family Investment Companies
- These can be powerful planning tools but may be affected by rule changes expected around 2026–2027. Take professional advice before making structural changes.
4. Business and agricultural relief (APR and BPR): prepare for 2026 reform
From 6 April 2026, APR and BPR will change significantly.
What’s changing?
Each individual has a £2.5 million allowance that can benefit from 100% relief (transferable to a spouse or civil partner).
Assets above £2.5 million qualifying for Business Relief will usually receive reduced (50%) relief, rather than full exemption from IHT.
Most AIM shares and similar assets will qualify for 50% relief only, not 100%. These are high‑risk investments, and you could lose all your money if you invest in them.
What to review before April 2026
Ownership structures within families or corporate setups.
Lifetime transfers and trust planning – it’s important to consider the seven‑year survival rule, the ten‑year trust charge regime, and the 14‑year look‑back rule, under which certain trust transfers made many years earlier can still affect the IHT position on death. These can be complex considerations, and you may benefit from professional financial advice to ensure you’re making full use of the allowances available to you.
Planning for sufficient liquidity to meet IHT liabilities without needing to sell assets.
5. High‑value property: prepare for the new annual surcharge
A new High Value Council Tax Surcharge will be introduced for English residential properties valued above £2 million.
- Valuations will be set in 2026.
- Charges will apply from April 2028.
- Annual costs may be around £2,500–£7,500, indexed thereafter.
Consider:
- Whether to hold property personally or via a company, depending on your circumstances.
- How the surcharge interacts with other property-related taxes and your wider estate planning.
6. Portfolio structure: reduce tax drag across wrappers
The way investments are held can be as important as the investments themselves.
Areas to review
- Pensions: Particularly in light of post‑2027 changes to death benefits.
- ISAs: Maximise annual allowances; note cash ISA changes for under‑65s from 2027.
- General investment accounts (GIAs): Review dividend and interest exposure and ownership (between spouses and civil partners) ahead of expected rate changes in 2026/27.
- Bonds and investment trusts: Assess suitability, charges, timing and ownership.
Financial planning for 2026: a helpful rhythm
- Stress‑test 5–10‑year cashflows under the new tax landscape – a financial planner can help with this.
- Maintain an appropriate liquidity buffer to avoid forced sales.
- Carry out an annual review to capture new allowances, legislation changes and opportunities.
Year‑end checklist for high‑net‑worth investors
Taking the next step
Small adjustments made consistently can add up to meaningful long‑term improvements. For investors, coordinated and proactive tax planning remains one of the most effective ways to protect and grow wealth for the future.
If you would like to review your financial plan and explore ways to improve your tax efficiency, please contact your usual Rathbones adviser or complete our enquiry form below.
