Navigating Tax Changes in the New Tax Year.

Navigating Tax Changes in the New Tax Year by Carly Buck, Financial Planner with Anstee & Co.

Now that we are in the 2026/27 tax year, a number of important tax changes have come into effect, which may impact investment and estate planning strategies. In particular, updates to Business Property Relief (BPR), Alternative Investment Market (AIM) and Venture Capital Trusts (VCTs).

Business Property Relief (BPR)

From 6th April 2026, Business Property Relief continues to provide inheritance tax relief, but the full 100% relief is now limited to the first £2.5 million of qualifying business and agricultural assets, which can also be transferred between spouses. However, any qualifying assets above this level will qualify for relief at a reduced rate of 50%, meaning that the excess value may be subject to inheritance tax, resulting in an effective tax charge of around 20%.

Alternative Investment Market (AIM)

Effective from the 6th April 2026, AIM investments continue to play a role in inheritance tax planning, although the level of relief available has now been adjusted. Business Property Relief (BPR) on qualifying AIM shares has reduced from 100% to 50%, meaning they are no longer fully exempt from inheritance tax after two years of ownership.

This is an effective inheritance tax rate of 20% on AIM holdings at death, compared with the standard 40%. AIM investments still qualify for BPR and continue to offer a flexible approach to estate planning.

While AIM portfolios now sit outside the new £2.5 million cap for full relief, they remain a useful tool for helping to manage a clients overall inheritance tax exposure.

Venture Capital Trusts (VCTs)

From 6th April 2026, the upfront income tax relief on VCT subscriptions has been reduced from 30% to 20%. While VCTs continue to offer attractive benefits, including tax-free dividends and capital gains tax-free growth, the reduction in initial tax relief means the immediate tax advantage is less generous than in previous years.

Other Key Tax Considerations for 2026/27:

• Dividend Tax: Effective now, the rate for dividend taxation has increased 2%. This means dividends are now taxed at 10.75% for basic rate taxpayers, 35.75% for higher rate taxpayers, while the additional rate remains unchanged at 39.35%. This increases the tax payable on dividend income for investors with shares outside tax-efficient wrappers.
• Making Tax Digital: From April 2026, it applies to individuals who are self-employed and/or receive rental income where gross annual income exceeds £50,000. Affected taxpayers are required to keep digital records and submit quarterly updates to HMRC using compatible software, along with an annual final declaration.
• Pensions and Inheritance Tax – Looking ahead, from 6th April 2027, pension funds will be included within the value of your estate for Inheritance Tax purposes. This means that if your total assets exceed the available allowances — currently the Nil Rate Band of £325,000 per person, plus the Residence Nil Rate Band of up to £175,000 per person when passing the family home to direct descendants — any excess value will be subject to IHT at 40%.

How Anstee & Co. can help you with your Tax Planning.

With these changes on the horizon, your annual review is an important time to assess your current position and consider ways to help mitigate a potential tax liability. This may include strategies such as gifting, spending, trusts, specialist IHT investment solutions, and whole of life protection.

We are a firm of Independent Financial Advisers (IFAs), meaning that the financial advice we provide is unbiased. Why not arrange a meeting with us to explore how we can assist you? The initial meeting is at our expense and comes with no obligation. We can schedule meetings at times and locations that are convenient for you.

Our Head Office is in Kettering, Northamptonshire.

In addition, our financial advisers live and make use of  meeting rooms in:

• Market Harborough, Leicestershire
• Bedford, Bedfordshire
• Northampton, Wellingborough, and Thrapston, Northamptonshire

Our expertise encompasses all aspects of financial planning, including pensions, investments, and mortgages.

We would love to hear your thoughts or comments on this article, “Navigating Tax Changes in the New Tax Year”.

Lastly, please note that the information provided in this article is for informational purposes only and does not constitute financial advice. No action should be taken based solely on this information. Anstee & Co. is authorised and regulated by the Financial Conduct Authority (FCA).