If you have been following the news, you may be aware that the government announced several tax changes in the 2024 and 2025 Budgets, some of which took effect immediately.
However, several of these pieces of tax legislation will come into force from April 2027.
This could mean that, depending on your circumstances, you might pay more tax. Fortunately, as you have almost a year to prepare, there are ways you can adapt to the changes.
Here are three tax changes taking effect from April 2027 and how you can prepare.
1. Your pensions will be liable for Inheritance Tax
Changes to the tax treatment of pensions after you pass away could have a marked effect on your estate plans.
Currently, your pensions are considered outside of your estate for Inheritance Tax (IHT) purposes. That means you can leave a considerable portion of your wealth to loved ones without IHT.
Retirees may consider this when deciding how to draw from their various sources of savings, too. By using ISAs and non-pension investments to fund your lifestyle and retaining pension wealth, you could pass more to the next generation tax-efficiently.
However, from April 2027, the IHT exemption for pensions will end. This means that any wealth left in your pensions when you pass away will form part of your estate when calculating IHT.
According to the UK government, an additional 10,500 estates could become liable for IHT as a result of the changes. Approximately 38,500 estates that would already pay IHT are likely to face a larger bill.
As a result, you may need to review your estate plan and reconsider how you will pass wealth to the next generation, so you can reduce IHT as much as possible.
We could support you here by:
- Explaining how the changes will affect you
- Exploring options for lifetime gifting
- Reviewing your retirement spending plans.
While the changes may make it more difficult to mitigate IHT, you have many avenues for passing wealth to the next generation tax-efficiently, provided you plan early.
2. The Income Tax on property income and savings interest will rise
Although the headline rates of Income Tax remain unchanged, the chancellor announced important amendments to the tax on dividends and property income during her 2025 Budget.
The basic and higher rates of Dividend Tax increased by two percentage points on 6 April 2026.
Meanwhile, changes to the Income Tax rate on property earnings and savings interest will take effect in April 2027.
Property income
Currently, any income you generate from a rental property is subject to Income Tax along with your other regular earnings, including your salary.
The amount you pay depends on the bracket that your rental income falls into. You will pay:
- The basic rate of 20% on earnings between £12,570 and £50,270
- The higher rate of 40% on earnings between £50,271 and £125,140
- The additional rate of 45% on earnings above £125,140.
However, from April 2027, all these rates will increase by two percentage points for rental income.
As such, if you’re a landlord, you could pay more tax in the future.
We can help you prepare by exploring ways to mitigate Income Tax, such as increasing your pension contributions. Additionally, we can discuss different investment options as the cost of being a landlord rises.
Savings interest
If you hold cash savings outside an ISA, you might pay tax on the interest you generate.
Fortunately, you have a Personal Savings Allowance (PSA) of:
- £1,000 if you’re a basic-rate taxpayer
- £500 if you’re a higher-rate taxpayer
- £0 if you’re an additional-rate taxpayer.
Any interest that exceeds your PSA and your Personal Allowance (£12,570 in 2026/27) is taxable. Income Tax on your interest is currently charged at the standard rates, as described above.
However, the same increase that applies to property income will also affect savings interest from April 2027.
You can adapt to this change by:
- Holding cash savings in an ISA, which does not attract Income Tax
- Investing a larger portion of your wealth instead of holding lots of cash
- Increasing your pension contributions.
Although a 2% increase might sound like a small amount, it can quickly add up, so it’s important to prepare for this change.
3. The amount you can save tax-efficiently in a Cash ISA will fall
Using a Cash ISA could be a useful way to adapt to the increased tax on savings interest. However, it’s important to understand another rule change that might affect you from April 2027.
In 2026/27, you can save up to £20,000 across all your adult ISAs. You might save in a Cash ISA or invest in a Stocks and Shares ISA, for example. It’s up to you how you divide that £20,000 allowance between different ISAs each year.
The chancellor announced that the rules around the ISA allowance would change from April 2027 to encourage consumers to invest more of their wealth.
While you will still be able to contribute a total of £20,000 a year to your ISAs, only £12,000 of that will be able to go into a Cash ISA.
This could be limiting in certain circumstances, but you may also see it as an opportunity to review how you hold your wealth.
Keeping some cash is useful for an emergency fund or to pay for short-term goals such as holidays. However, inflation can erode the real-terms value of your cash over time, making it difficult to generate significant growth.
Meanwhile, investing could be more likely to deliver inflation-beating returns.
As we prepare for the upcoming changes to the Cash ISA subscription limit, we can review the amount of cash you hold and consider whether you could benefit from investing more.
Get in touch
Tax changes can be daunting, but with our support, you can adapt to new legislation and ensure you’re still able to achieve your long-term goals.
Please give us a call on 01276 855717 or email info@braywealth.com today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
HM Revenue and Customs’ practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
An ISA is a medium to long-term investment, which aims to increase the value of the money you invest for growth or income or both. The value of your investments and any income from them can fall as well as rise. You may not get back the amount you invested.
Approved by the Openwork Partnership on 30/04/2026
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