Ahead of the tax year end on 5 April 2026, it is crucial that your clients have their business and personal finances arranged to maximise their wealth. This blog considers ways in which your clients can make the most of the tax planning options available to them.
Reviewing financial goals
Planning ahead of the tax year end is crucial if businesses and individuals are to maximise the reliefs available to them in order to minimise their tax liability. Reviewing financial goals will help to ensure clients’ finances are in the strongest possible position for whatever the future may hold. It is essential to act now to maximise tax reliefs and minimise tax bills – clients are advised not to leave it until 5 April 2026. Talking to an accountant in good time will ensure that they can discuss the tax planning opportunities available.
Business measures
Main rate of Corporation Tax capped
The rates of Corporation Tax will remain unchanged: from April 2026, the rate will stay at 25% for companies with profits over £250,000. The government has committed to capping the main rate of Corporation Tax at 25% for the duration of this parliament.
The small profits rate of 19% will be payable by companies with profits of £50,000 or less.
Changes to Capital Allowances
From 1 April 2026 the government will reduce the main rate Writing Down Allowance (WDA) from 18% to 14% per year for Corporation Tax purposes, and from 6 April 2026 for Income Tax purposes. For businesses with chargeable periods which span 1 April (Corporation Tax) or 6 April (Income Tax), a hybrid rate will apply. The WDA on the special rate pool remains at 6% per year.
Expenditure incurred on or after 1 January 2026 will be subject to a new First Year Allowance (FYA) of 40% for all businesses on main rate assets. Cars, second-hand assets and assets for leasing overseas will not be eligible.
Employment measures
Extending the Income Tax and National Insurance freeze
In her Autumn Budget, Chancellor Rachel Reeves outlined tax-raising measures worth up to £26 billion. The increases will be achieved via a range of methods, including extending the freeze on Income Tax and National Insurance thresholds for a further three years.
Salary sacrifice
Starting from April 2029, only the first £2,000 of employee pension contributions through salary sacrifice each year will be exempt from National Insurance contributions (NICs). Contributions made through salary sacrifice, like all pension contributions, will still be exempt from Income Tax (subject to the usual limits).
Employers and employees can still make contributions above £2,000 through salary sacrifice arrangements, but employee contributions above this will be subject to employer and employee NICs.
Personal measures
Reforming ISAs
From 6 April 2017 the annual ISA cash limit will be set at £12,000. The remaining £8,000 will be designated for stocks and shares ISA investment.
This will not apply for individuals over the age of 65 – the cash ISA limit will remain at £20,000.
Tax on dividends
The first £500 of dividends is currently chargeable to tax at the Dividend Allowance of 0%. For 2026/27, this £500 is retained.
From 6 April 2026 there will be a 2% increase in the ordinary and upper rates of Income Tax applicable to dividends. The additional rate will remain unchanged at 39.35%. These rules apply to the whole of the UK.
Dividends received above the Dividend Allowance will be taxed at the following rates for 2026/27:
- 10.75% for basic rate taxpayers
- 35.75% for higher rate taxpayers
- 39.35% for additional rate taxpayers.
Changes to ISA limits
The ISA limits for 2026/27 are as follows:
- ISAs - £20,000
- Junior ISAs - £9,000
- Lifetime ISAs - £4,000 (excluding the government bonus)
- Child Trust Funds - £9,000.
These ISA limits will stay frozen until 5 April 2031. Meanwhile, from 6 April 2027, the annual Cash ISA limit will be set at £12,000, with the remaining £8,000 designated for Stocks and Shares ISA investment. However, for those aged over 65, this restriction will not apply.
High Value Council Tax Surcharge
From April 2028, properties valued at £2 million or more will be subject to a new High Value Council Tax Surcharge (HVCTS). This surcharge will be staggered depending on the value of the property: for properties worth over £2 million, the annual charge will be £2,500. Properties valued between £2.5 million and £3.5 million the charge will be £3,500 and for properties worth between £3.5 million and £5 million the annual charge will amount to £5,000.
Properties valued in excess of £5 million will be subject to an annual charge of £7,500.
Year End Tax Planning Guide
Mercia’s Year End Tax Planning Guide is packed full of practical advice and proven strategies for your clients to implement ahead of the tax year end. Check out our website for more information.