Tax doesn’t get simpler. Every year brings fresh allowances, frozen thresholds, and new rules to get your head around. In 2026, households across the UK are asking more questions than ever, and for good reason. From changes to dividend tax rates to upcoming shifts in inheritance tax on pensions, there’s a lot to keep track of.
Whether you’re trying to use up your ISA allowance before 5 April or working out how to pass on your estate more efficiently, having clear answers makes a real difference. Stick around until the end to find out what UK households are asking this tax year, and what you need to know.
How Much Can I Put in My ISA This Tax Year?
The ISA allowance for 2025/26 is £20,000 per adult. You can split this across different types of ISA, including cash and stocks and shares, as long as the total doesn’t exceed the limit. If you don’t use it before 5 April 2026, it’s gone. It won’t roll over to the next tax year.
Children can benefit from a Junior ISA with an allowance of £9,000 per child per year. Any interest or investment growth inside an ISA is free from UK income tax and capital gains tax, which is why they’re worth prioritising. If your spouse or civil partner hasn’t used their allowance, they can too, which doubles your household’s tax-free savings capacity.
What’s Happening to Dividend Tax in April 2026?
This is one of the questions generating the most concern right now. From 6 April 2026, dividend tax rates will rise for both basic and higher rate taxpayers. The basic rate will increase from 8.75% to 10.75%, while the higher rate will go from 33.75% to 35.75%. The additional rate stays unchanged at 39.35%.
If you hold dividend-paying investments outside a tax wrapper, you’ll feel this change. It’s worth reviewing whether those investments could sit inside an ISA or pension instead. Shifting to a tax-efficient structure before April could meaningfully reduce what you’ll owe going forward, particularly if dividends make up a significant part of your income. For more practical steps you can take now, these tax tips for tax year end cover a range of useful allowances to act on before 5 April.
Will My Pension Be Subject to Inheritance Tax?
This is one of the biggest changes on the horizon. From 6 April 2027, most unused pension pots and death benefits will be brought into a person’s estate for inheritance tax (IHT) purposes. Until that point, pensions sit outside your estate, which has made them a popular tool for passing on wealth. That will change.
Pension assets caught by IHT will be taxed at 40% on the amount above the threshold. If you leave your pension entirely to a spouse or civil partner, there’s no IHT charge. It’s worth noting that death in service benefits payable from a registered pension scheme and dependant’s scheme pensions from defined benefit arrangements are excluded from these changes and will remain outside the scope of inheritance tax.
For everyone else, it’s time to review pension nominations and think carefully about estate planning. Strategies like lifetime gifting, trusts, or life insurance written in trust could all be worth considering.
What Is the Capital Gains Tax Allowance Right Now?
The annual CGT allowance for 2025/26 is £3,000 per person. Any gains below this amount won’t attract tax. Spouses and civil partners can combine their allowances for jointly held assets, giving a combined buffer of £6,000. This resets every tax year, so it’s a use it or lose it figure.
The main CGT rates for the 2025/26 year are 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. If you’re planning to sell assets, spreading disposals across tax years where possible, and making sure gains stay within your annual allowance, can reduce what you’ll pay.
How Much Can I Give Away Tax-Free?
Gifting is one of the simplest ways to reduce the size of a taxable estate. The key allowances to know are:
- Annual gifting exemption: £3,000 per person per year (£6,000 for couples). You can carry forward one unused year, so a couple could gift up to £12,000 before 5 April if neither used their allowance last year.
- Small gifts exemption: £250 per person per year to as many individuals as you like (as long as they haven’t already received your annual exemption).
- Wedding gifts: Up to £5,000 to a child, £2,500 to a grandchild or great-grandchild, and £1,000 to anyone else.
- Gifts from surplus income: Regular gifts made from income you don’t need to live on can fall outside your estate entirely, though you’ll need to keep records.
Gifts made more than seven years before death will generally fall outside your estate for IHT. If you die within that window, a sliding scale of tax relief may still apply depending on how many years have passed.
How Much Can I Pay into My Pension and Still Get Tax Relief?
The annual pension allowance for 2025/26 is £60,000 (or 100% of your earnings, whichever is lower). You’ll receive tax relief on contributions at your marginal rate, which makes pensions one of the most tax-efficient ways to save. You’ll receive 20% tax relief automatically on your contributions, with the option to claim back more through your self-assessment tax return if you’re a higher or additional rate taxpayer.
If you haven’t used your full allowance in previous tax years, you may be able to carry it forward. This can be particularly useful if you’ve had a higher-earning year and want to reduce your tax bill. Bear in mind that the upcoming IHT changes to pensions from April 2027 may affect how you use your pension as part of your estate plan, so it’s worth taking stock before then.
How Are Cash ISA Rules Changing?
As mentioned before, the ISA allowance for 2025/26 remains at £20,000, but there are changes on the way that are worth knowing about now. From April 2027, the amount you can put into a cash ISA each year will drop from £20,000 to £12,000 if you’re under 65. The overall £20,000 ISA limit stays the same, so the difference can still go into stocks and shares or other ISA types, but it does mean cash savers will have less room to shelter their interest from tax.
For now, the Personal Savings Allowance still lets basic rate taxpayers earn up to £1,000 in interest tax-free, and £500 for higher rate taxpayers. But with thresholds frozen and interest rates still elevated, more people will find themselves crossing those limits.
Are Savings Tax Rates Changing as Well?
From April 2027, the basic rate on savings income will rise from 20% to 22%, the higher rate from 40% to 42%, and the additional rate from 45% to 47%. If you hold significant savings outside of an ISA, more of your interest will be taxed and at a higher rate.
To Wrap Up
The questions above reflect a genuine shift in the UK tax picture. Allowances are frozen, rates are changing, and major reforms to inheritance tax and pensions are coming. More households are now finding out that tax planning isn’t just for the wealthy, it’s something anyone with savings, investments, or a property needs to think about.
The good news is that there are still plenty of legal, practical steps you can take before the tax year closes on 5 April 2026. Using your ISA allowance, reviewing pension nominations, and thinking ahead about gifting and estate planning can all make a difference.
The value of your investments and the income from them may go down as well as up, and you could get back less than you invested. Past performance should not be seen as an indication of future performance.
David Prior
David Prior is the editor of Today News, responsible for the overall editorial strategy. He is an NCTJ-qualified journalist with over 20 years’ experience, and is also editor of the award-winning hyperlocal news title Altrincham Today. His LinkedIn profile is here.
