New tax year spring clean for your finances

1 Income Tax

For the tax year 2026/27, most personal rates and thresholds remain unchanged, except the Scottish starter and basic rate thresholds. The starter and basic rate Income Tax thresholds have increased by 7.4 per cent above inflation to £16,537 and £29,526, respectively.

As a result of this change, it is expected that more than 55 per cent of Scottish taxpayers will pay less income tax in 2026/27 than they would in the rest of the UK. A welcome change for many. The higher rate (£43,663-£75,000 at 42 per cent); advanced rate (£75,001-£125,140 at 45 per cent), and top rates (over £125,140 at 48 per cent) are frozen until 2028/29.

2 ISA Allowances

Despite the current economic challenges and rising costs, Individual Savings Accounts, (ISAs) remain a popular option for savers in the UK. With the option of Junior (for up to age 18), Cash, Stocks and Shares, or Lifetime ISAs (for those aged 18-39).

In September 2025, the total ISA market was valued at £871 billion, with £360bn in Cash ISAs and £511bn in Stocks and Shares ISAs, according to HMRC figures.

For the 2025/26 period, Cash ISAs represented 66 per cent of all ISA subscriptions.

For 2026/27, the ISA limit remains at £20,000 but it is the last chance for those under the age of 65 to deposit the full £20,000 into a Cash ISA. From 6 April 2027, the Cash ISA limit for under-65s will reduce to £12,000, with the remaining £8,000 required to be in stocks and shares.

Those aged 65 and over are exempt from the 2027 cash limit changes, allowing them to continue depositing the full £20,000 into cash.

Some Cash ISAs provide flexibility and allow you to withdraw and replace funds within the same tax year without impacting your allowance, but it is worth looking at the details of any that you have in place or are considering.

3 Pension Allowances

The standard annual allowance for 2026/27 remains £60,000 but reduces to between £10,000 and £60,000 for those with threshold income beyond £200,000 and adjusted income above £260,000. The allowance reduces by £1 for every £2 of adjusted income above £260,000, with the minimum tapered allowance of £10,000 applying once adjusted income reaches £360,000.

4 Pensions and Inheritance Tax

From 6 April 2027, most unused pension funds and death benefits will be included in the value of a person’s estate for Inheritance Tax (IHT) purposes. This change is designed to discourage the use of pensions as a wealth transfer tool and encourage their use for retirement.Inherited pensions may also incur income tax (up to 45 per cent) upon drawdown, leading to a combined effective tax rate of 64-67 per cent, or even higher for large estates.

The UK Government estimates that around 10,500 estates will become liable for IHT annually as a result of this change.

With the implementation date now just 12 months away, 2026/27 is the last full tax year for meaningful pre-emptive planning in this regard – reviewing pension nomination forms, considering earlier drawdown, and restructuring estate plans to account for the new dual tax burden.

5 Other Factors to review

If applicable, consider your investment income as the dividend tax rise makes wrappers more valuable – unshielded dividend income now costs meaningfully more.

If you are a company director, review your salary and dividend mix. Pension inputs made via employer contributions and salary sacrifice may be preferable.It is also wise to use pension carry-forward to build pension pots. And review pension beneficiary nominations – the April 2027 IHT changes highlight the importance of these.

If you are self-employed or have property income in excess of £50,000, consider the Making Tax Digital software, as quarterly digital filing is now mandatory.

If your assets and savings are significant, you should definitely seek professional financial advice. A combination of changes to pensions and Inheritance Tax, business property relief, and frozen thresholds have created a complex situation for many to navigate without professional support.

Content is for information only and should not be considered advice

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