2025/2026 Tax Year: What high earners and investors need to know 

The start of a 2025/2026 tax year brings a chance to revisit your financial strategy. And while there were no sweeping changes in April 2025, the cumulative impact of frozen thresholds, shrinking allowances, and upcoming policy reviews could significantly affect higher earners and those with substantial assets. 

Here’s a summary of the most relevant updates. 

No major tax rises — but people might be paying more 

Income tax thresholds remain frozen — including the Personal Allowance and higher-rate threshold — which means that as incomes rise, more of it is taxed at higher rates. 

Why it matters:
Many professionals and business owners will find themselves moving into higher tax bands without a change in policy — a form of “stealth taxation”. 

What to consider:
Review how you take income (salary, dividends, bonuses), and ensure you’re using tax-efficient vehicles such as pensions and ISAs. 

Capital Gains and Dividend allowances remain low 

The Capital Gains Tax exemption is just £3,000, and the Dividend allowance is just £500 — both frozen for 2025/26. 

Why it matters:
Investors, business owners, and those selling assets could see more of their income taxed. 

What to consider:
Use tax wrappers like pensions or ISAs and consider timing disposals carefully across tax years. 

Pensions – the new rules are now fully in effect 

The Lifetime Allowance (LTA) has been abolished, but new caps now apply: 

• Lump Sum Allowance (LSA): £268,275 

• Lump Sum and Death Benefit Allowance (LSDBA): £1,073,100 

Why it matters:
There’s no limit on pension fund size — but the tax-free lump sum and death benefit caps still apply. 

What to consider:
If you paused pension contributions due to the old limits, this may be the time to resume. Review your retirement income strategy and legacy plans. 

Inheritance Tax thresholds are still frozen 

The IHT nil-rate band (£325,000) and residence nil-rate band (£175,000) remain frozen until at least 2028. 

Why it matters:
More estates will be caught by the 40% IHT charge — especially those with property wealth. 

What to consider:
Start planning early. Lifetime gifting, trust strategies, and family structuring can help reduce exposure. 

Property tax reform is under review — but no changes yet 

The October 2024 Budget launched a consultation on replacing Stamp Duty with an annual property tax on high-value homes. No changes have yet taken effect. 

Why it matters:
If you own a second property or investment portfolio, this could affect you in future years. 

What does this mean for you? 

The 2025/2026 tax year is more about preparing for what’s ahead than reacting to immediate change. The direction of travel is clear: 

• Tax allowances are being squeezed 

• Wealth and property may be taxed more heavily in future 

This is a timely opportunity to review how your wealth is structured — and how you can use the current rules to your advantage. 

At Bowmore Financial Planning, we help clients make sense of the financial landscape and stay one step ahead. If you’re ready to revisit your strategy, we’re here to help. 

Regulatory Information 

• The value of your investments can go down as well as up, so you could get back less than you invested 

• The tax treatment of certain products depends on the individual circumstances of each client and may be subject to change in future 

• Past performance is not a guide to future performance 

• Bowmore Asset Management Ltd is authorised and regulated by the FCA 

• Bowmore Financial Planning Ltd is authorised and regulated by the FCA 

• The Financial Conduct Authority does not regulate Estate Planning or Inheritance Tax Planning