Five significant changes that took place in the last tax year

The 2026/27 tax year has officially begun.

As we move forward into the next few months, it’s worth pausing to reflect on what shifted in the tax year just gone.

From frozen thresholds and rising payroll costs to higher Capital Gains Tax (CGT) and tighter allowances, the 2025/26 tax year introduced a series of changes that affected individuals, investors and businesses alike.

Below, we break down four of the most significant updates, the impact they had – and how Attivo can help through our tax planning services.

Here are five significant changes that happened in the 2025/26 tax year:

1. Personal allowance on income tax froze

Personal allowance (what you can earn before being charged income tax) remained frozen at £12,570. This had been £12,500 up until 2021/22.

Tax bands also remained unchanged across England, Wales and Northern Ireland, whilst Scottish taxpayers continued to use their own tax structure, with updated Starter, Basic, Intermediate, Higher and additional bands:

What was the impact?

As a result, individuals paid more income tax year on year, even where pay rises remained aligned with inflation. This particularly affected middle earners approaching the higher‑rate threshold, as well as those with income between £100,000 and £125,140, where the tapering of the personal allowance creates an effective marginal tax rate of up to 60%.

Over time, the continued freeze has brought more workers and pensioners into the tax system, reduced take‑home pay in real terms, and increased the importance of proactive tax planning, including pension contributions and salary sacrifice arrangements.

2. Inheritance Tax (IHT) charges were updated

Significant changes to IHT were announced during the 2025/26 tax year, including reforms to the way agricultural assets are taxed.

As of 6 April 2026, full IHT relief for qualifying agricultural and business assets is capped at £2.5 million per individual. Any value above this threshold qualifies for only 50% relief, resulting in an effective 20% IHT charge on the excess.

As a result, higher-value agricultural estates may now face an IHT liability for the first time.

In addition, the government announced during the 2025/26 tax year that most unused pension funds and pension death benefits will be brought within the scope of IHT, with these changes taking effect from 6 April 2027.

This means that, in many cases, pension wealth will be treated as part of an individual’s estate when calculating IHT, marking a significant change from the long‑standing position where pensions typically sat outside the estate.

What was the impact?

These changes propelled landowners, farmers and family businesses into uncertainty and prompted the need for advanced planning to try and prevent increased tax burden on succession. For many families, pensions have historically sat outside the estate for IHT purposes, meaning the change could increase the value of the taxable estate and, in some cases, push more households into an IHT liability.

For pensions, while certain benefits are expected to remain excluded (for example, death-in-service benefits from registered pension schemes and some dependant scheme pensions), it’s clear that estate planning is likely to become more complex, and pension strategy will need to be considered alongside wider succession and legacy objectives.

3. National Insurance and minimum wage increased

Employers’ National Insurance Contributions (NICs) increased from 13.8% to 15% on 6 April 2025, while the secondary threshold was lowered from £9,100 to £5,000 per year.

Simultaneously, Employment Allowance increased to £10,500, and more small businesses were brought into the fray. National Living Wage additionally rose in April 2025 by 6.7% to £12.21 per hour for workers aged over 21.

What was the impact?

These increases have created additional financial pressure for businesses. According to the OBR, the changes are estimated to add around 2% to employers’ payroll costs. This has led many employers to consider other means of cutting costs, including reducing employee working hours or pausing recruitment drives.

4. Capital Gains Tax (CGT) rose from 10/20% to 18/24%

CTG rates increased across the board in the last tax year, following reforms that were announced in the Autumn 2024 budget:

These rates applied to shares and investments, funds and Exchange Traded Funds (ETFs), crypto assets and second homes/buy-to-let properties.

Simultaneously, the annual exempt allowance remained frozen at £3,000 for individuals and £1,500 for trusts:

Finally, Business Asset Disposal Relief (BADR) and Investors’ Relief rose from 10% to 14%.

What was the impact?

Overall, these changes brought more individuals into the tax net and resulted in tax being paid on smaller gains than in previous years. Residential property gains for higher‑rate taxpayers were less impactful, however, CGT liabilities across the board meant that investors and businesses needed to plan for taxes more carefully and time-efficiently.

5. State Pension and statutory payments increased

In the 2025/26 tax year, Statutory Sick Pay (SSP) increased to £118.75 per week, providing a small uplift compared with the previous year – however, eligibility rules and waiting periods in 2025/26 did not change, meaning that SSP was only available to employees who met the existing criteria. More significant reforms to SSP, including day‑one entitlement and wider eligibility reforms were confirmed to start in April this year (2026).

What was the impact?

While the higher weekly rate offered some short-term support, SSP remained well below typical earnings. This left many employees facing reduced income if they were unable to work due to illness, and those who did not meet the eligibility requirements/had short-term illnesses receiving little or no financial support. Sickness‑related income security should now see improvements however following this month’s reforms.

Sources:

HM Revenue & Customs (2018) Capital Gains Tax rates and allowances. GOV.UK (guidance), updated 6 April 2026. Available at: https://www.gov.uk (Accessed: 9 April 2026).

HM Revenue & Customs (2024) Capital Gains Tax — rates of tax. GOV.UK (policy paper), updated 6 November 2024. Available at: https://www.gov.uk (Accessed: 9 April 2026).

HM Revenue & Customs (2024) Changes to the Class 1 National Insurance Contributions Secondary Threshold, the Secondary Class 1 National Insurance contributions rate, and the Employment Allowance from 6 April 2025. GOV.UK (policy paper), 13 November 2024. Available at: https://www.gov.uk (Accessed: 9 April 2026).

HM Revenue & Customs (2025) Inheritance Tax: unused pension funds and death benefits. GOV.UK (policy paper), published 26 November 2025. Available at: https://www.gov.uk (Accessed: 9 April 2026).

HM Revenue & Customs (n.d.) Income Tax rates and Personal Allowances. GOV.UK (guidance). Available at: https://www.gov.uk (Accessed: 9 April 2026).

HM Revenue & Customs (n.d.) Tax on dividends. GOV.UK (guidance). Available at: https://www.gov.uk (Accessed: 9 April 2026).

HM Treasury (2025) Inheritance tax reliefs threshold to rise to £2.5m for farmers and businesses. GOV.UK, published 23 December 2025. Available at: https://www.gov.uk (Accessed: 9 April 2026).

Low Pay Commission (2025) National Living Wage increases to £12.21. GOV.UK (press release), 28 March 2025. Available at: https://www.gov.uk (Accessed: 9 April 2026).

Office for Budget Responsibility (2025) Economic and fiscal outlook – November 2025. Office for Budget Responsibility, 26 November 2025. Available at: https://obr.uk (Accessed: 9 April 2026).

UK Government (n.d.) Statutory Sick Pay (SSP). GOV.UK (guidance). Available at: https://www.gov.uk (Accessed: 9 April 2026).

Important information

This article is provided for information purposes only and does not constitute personal advice or a recommendation. Any decisions should be made in the context of your individual circumstances and objectives.

Tax treatment depends on individual circumstances and may change in the future. Levels, bases and reliefs from taxation are subject to change and their value depends on individual circumstances.

Where regulated financial advice is provided, this will be delivered by Attivo Financial Limited, which is authorised and regulated by the Financial Conduct Authority. Tax planning itself is not a regulated activity.

The value of investments and any income from them can fall as well as rise, and you may get back less than you invest.

References to future tax rules are based on our understanding of government announcements and current proposals. These measures are subject to change and only take effect if and when incorporated into legislation.