28th January 2026
Over the last few Budgets, the government has announced a wide range of tax changes. Some are already in place, while others will be introduced gradually over the next few years.
We have put together a guide that sets out the main changes, year by year, so you can see what’s coming and when. Not all of these changes will affect everyone which is positive, but many people will notice higher taxes over time. This is mainly as a result of the ‘stealth tax’ that comes from freezing the allowances causing fiscal drag.
From 6 April 2025
Capital Gains Tax
The tax rate on qualifying business sales increased under Business Asset Disposal Relief (BADR). The rate rose from 10% to 14% on lifetime gains of up to £1 million.
A further increase is scheduled for 2026, taking the rate to 18%.
National Insurance
Employers now pay National Insurance at a higher rate:
Employer NICs increased from 13.8% to 15%
The earnings level at which employers start paying NICs dropped from £9,100 to £5,000
These two changes effectively hit employers twice at the last budget and the lower threshold is frozen until April 2031
Non-Dom tax rules
The long-standing remittance basis and the concept of domicile for tax purposes were removed in April 2025.
They have been replaced by a new Foreign Income and Gains (FIG) regime, which is based on UK residency rather than domicile.
Inheritance Tax now applies to worldwide assets once someone is considered a long-term UK resident, typically meaning they have lived in the UK for more than 10 of the last 20 years.
From 6 April 2026
Pensions
The State Pension triple lock remains in place for the rest of the current Parliament, leading to a 4.8% increase from April 2026.
New weekly rates will be:
Full New State Pension: £241.30
Full Basic State Pension:
£184.90 for single people
£295.65 for couples
There are no changes to pension tax relief or tax-free lump sums. This was widely rumoured prior to the budget causing many people to make uninformed decisions that may have a lasting impact on their financial position
Income Tax
Several key income tax allowances and thresholds remain frozen until April 2031 (see the ‘Stealth Tax mentioned earlier) This includes:
The personal allowance (£12,570)
Higher and additional rate thresholds
As wages increase over time, more income is likely to fall into higher tax bands meaning that in real terms more people pay more tax even though the Government can say that they have not actually increased income tax.
Dividend tax rates will rise too:
Basic rate: 10.75%
Higher rate: 35.75%
Additional rate remains at 39.35%
The £500 dividend allowance remains unchanged.
Venture Capital Trusts (VCTs)
Income tax relief on new VCT investments reduces from 30% to 20%.
Capital Gains Tax
The BADR rate increases again, from 14% to 18%, on qualifying gains up to £1 million.
Inheritance Tax
Relief for business and agricultural assets is reduced:
Full (100%) relief applies only to the first £2.5 million
Values above this receive 50% relief
Any unused allowance can now be transferred between spouses or civil partners, allowing up to £5 million of qualifying assets to pass on with full relief.
AIM shares and unlisted shares will no longer qualify for full relief and will instead receive 50% relief.
The option to pay Inheritance Tax in interest-free instalments over 10 years is extended to more types of qualifying property.
The Inheritance Tax nil rate band (£325,000) and residence nil rate band (£175,000) remain frozen until April 2031, another change that will cause more people to pay more tax.
National Insurance
Employer NIC thresholds remain frozen
No changes to NIC rates
Self-employed Class 2 contributions rise to £3.65 per week
Voluntary Class 3 contributions increase to £18.40 per week
From 6 April 2027
Pensions and Inheritance Tax
Most unused pension savings will become subject to Inheritance Tax on death. This is one of the largest changes in pension legislation in recent times.
The main exceptions are:
Pension funds passed to a spouse or civil partner
Lump sum death-in-service benefits
This change is expected to bring more estates within the scope of Inheritance Tax.
Income Tax
Tax rates on savings income and rental income increase by 2 percentage points across all bands:
Basic rate: 22%
Higher rate: 42%
Additional rate: 47%
These increases also apply to investment bond gains. Discretionary trusts will pay tax at 47%.
From April 2027, the personal allowance will be applied to earned income and pensions before other types of income. For most people, this will not change how their tax is calculated in practice.
ISAs
People aged 65 and over can continue to save the full £20,000 a year into a Cash ISA
For those under 65, Cash ISA savings are capped at £12,000, with the remaining allowance available for Stocks & Shares ISAs
From 6 April 2028
High-value property charge
A new High Value Council Tax Surcharge will apply to homes worth £2 million or more.
The surcharge starts at £2,500 and increases to £7,500 for properties worth over £5 million. Most homes will not be affected.
Scotland will introduce similar changes, including new council tax bands for properties valued above £1 million.
Minimum pension age
The normal minimum age at which pensions can be accessed increases from 55 to 57.
This affects most people born after 5 April 1971, unless they have a protected pension age or retire due to ill health.
From 6 April 2029
Pension salary sacrifice and National Insurance
The National Insurance exemption for pension contributions made through salary sacrifice will be capped at £2,000 per year.
Any salary sacrificed above this amount will be subject to National Insurance.
Final thoughts
These changes reflect a gradual shift toward higher overall taxation, often through frozen allowances and tighter reliefs rather than headline tax rises.
While not all of these measures will affect everyone, many people will feel the impact over time. It is important to pay attention to changes and plan in advance where possible. If you have any questions or concerns it is always good to seek independent financial advice.