Updated for the 2026/27 tax year (6 April 2026 to 5 April 2027)
Most people think about one tax when they think about what they leave behind. In practice, four can touch what you own, what you earn from it, and what eventually passes to your family.
Those four are income tax, capital gains tax, inheritance tax and corporation tax. Here is where each one stands this tax year, and what is already scheduled to change.
1. Income tax
Income tax is charged on earnings, pensions, savings interest, rental profits and dividends.
For England, Wales and Northern Ireland in 2026/27:
| Band | Taxable income | Rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Scotland sets its own bands and rates, which run from 19% up to 48%.
Both the allowance and the thresholds have been frozen until April 2031, which means pay rises and rising pension income gradually pull more people into higher bands.
The £100,000 trap
If your income sits between £100,000 and £125,140, you may be paying more tax at the margin than anyone else in the country.
It happens because of the way the personal allowance is withdrawn. For every £2 you earn above £100,000, you lose £1 of your tax-free allowance. So on an extra £1,000 of income you pay £400 in higher rate tax, and another £200 because £500 of previously tax-free income has become taxable. That is £600 on £1,000, an effective rate of 60%, or 62% once national insurance is counted.
Above £125,140 the allowance has gone completely and the rate drops back to 45%.
Parents can be hit twice. Tax-free childcare and the free childcare hours stop entirely once income passes £100,000. There is no taper, and a single pound over the line is enough.
The £100,000 threshold has not moved since 2010, so more people reach it every year. There are ways to manage this, and if it applies to you it is worth speaking to a financial adviser.
Savings and dividends
Savings interest has its own reliefs. There is a starting rate band of up to £5,000 taxed at 0%, and a personal savings allowance of £1,000 for basic rate taxpayers, £500 for higher rate taxpayers and nothing for additional rate taxpayers.
Dividends went up this April. The allowance stays at £500, but the rates rose by two percentage points for basic and higher rate taxpayers:
| Taxpayer | 2025/26 | 2026/27 |
|---|---|---|
| Basic rate | 8.75% | 10.75% |
| Higher rate | 33.75% | 35.75% |
| Additional rate | 39.35% | 39.35% |
Why it matters for your estate
Income tax does not stop at death. An estate continues to earn interest, dividends and rent while it is being administered, and the executors have to account for tax on that income before anything is distributed.
2. Capital gains tax
Capital gains tax (CGT) is charged on the profit when you sell or give away an asset that has risen in value. Shares, second homes, buy to lets and valuable possessions are the usual examples. Your own main home is normally exempt.
For 2026/27:
- 18% on gains that fall within your remaining basic rate band
- 24% on gains above it
- The same rates apply to property, shares and most other assets
- The annual exempt amount is £3,000 per person
- Trustees and personal representatives pay a flat 24%, with a £1,500 exempt amount for most trusts
Business Asset Disposal Relief, which applies to qualifying business sales, rose again this year. It was 10% until April 2025, 14% during 2025/26, and is now 18% on qualifying gains up to a £1 million lifetime limit.
If you sell UK residential property at a gain, the tax has to be reported and paid within 60 days of completion, separately from your tax return.
Why it matters for your estate
There is no capital gains tax on death. Assets are revalued to their market value at the date of death, and any gain built up during your lifetime falls away. This is one reason gifting assets during your lifetime and leaving them in your Will can produce very different results, and why the two need looking at together.
3. Inheritance tax
Inheritance tax (IHT) is charged on the value of your estate when you die, and on certain gifts made in the seven years before.
The headline figures for 2026/27:
- The rate is 40% on anything above your available allowances
- It drops to 36% if you leave at least 10% of your net estate to charity
- The nil rate band is £325,000 per person
- The residence nil rate band adds up to £175,000 where a home passes to children, grandchildren or other direct descendants
- The residence band is reduced by £1 for every £2 by which the estate exceeds £2 million
Anything left to a spouse or civil partner is exempt. Unused allowances also transfer to them, which is why a married couple can often pass on up to £1 million between them before any tax is due.
All three of those thresholds are frozen until April 2031. The nil rate band has now been £325,000 since 2009.
Lifetime gifts
Gifts to individuals are normally free of inheritance tax if you survive them by seven years. Die within that period and they come back into the calculation, with taper relief reducing the tax on gifts made between three and seven years before death.
Some gifts are exempt straight away:
- £3,000 a year in total, and any unused amount can be carried forward one year
- £250 per person per year, to as many people as you like
- Wedding gifts of £5,000 to a child, £2,500 to a grandchild and £1,000 to anyone else
- Regular gifts out of surplus income, with no upper limit, provided they are genuinely regular, paid from income rather than capital, and do not reduce your standard of living
That last one is the most useful and the most overlooked. It also depends on keeping proper records, because HMRC will want evidence.
Business and farming assets changed in April 2026
Agricultural Property Relief and Business Property Relief used to remove qualifying farms and trading businesses from inheritance tax without limit.
Since 6 April 2026 there is a cap. The first £2.5 million of combined qualifying agricultural and business property still gets 100% relief. Anything above that gets 50% relief, which works out at an effective 20% tax charge.
The allowance is transferable between spouses and civil partners, so a couple can potentially shelter up to £5 million. It is also transferable where the first death happened before April 2026.
Shares on AIM are treated separately. They now attract 50% relief only, and they do not use up the £2.5 million allowance.
4. Corporation tax
Corporation tax is paid by limited companies on their profits. It also applies to some organisations that are not limited companies, including members’ clubs, societies, trade associations, housing associations and co-operatives. Sole traders and partnerships pay income tax instead.
The rates for 2026/27 are unchanged:
| Taxable profits | Rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,001 to £250,000 | Marginal relief, giving an effective rate between 19% and 25% |
| Over £250,000 | 25% (main rate) |
Marginal relief smooths the step between the two rates, although profit inside that middle band is actually taxed at 26.5% at the margin. If your company has associated companies, both thresholds are divided between them, so the higher rate arrives sooner.
Corporation tax is normally due nine months and one day after the end of the accounting period.
Why it matters for your estate
If you own shares in a family company, that shareholding is part of your estate. Whether it qualifies for Business Property Relief, how it is valued, and who inherits it are all questions worth answering in advance rather than leaving to your executors.
What is changing in April 2027
Two changes are already legislated and worth planning around now.
Savings and rental income rates rise. From 6 April 2027, tax on savings income increases by two percentage points across all bands, to 22%, 42% and 47%. Separate property income rates come in at the same levels for England, Wales and Northern Ireland. Savings held in ISAs and pensions are not affected.
Pensions come into the inheritance tax net. From 6 April 2027, most unused pension funds and pension death benefits will count as part of your estate for inheritance tax. For decades pensions have sat outside it. Anything passing to a surviving spouse or civil partner, or to a registered charity, stays exempt, and death in service lump sums are excluded. Pensions left to children or other beneficiaries are not.
This is the change that catches most people out, because a pension is often the largest thing a person owns after their home, and it has never previously counted.
Where to start
None of this needs to be tackled all at once. A sensible first pass is usually:
- Add up what you own, including your pension, and see where it sits against your allowances
- Check who is named on your pension nomination forms, and when you last looked
- Make sure you have a valid, current Will that reflects your family as it is now
- Look at whether regular gifting out of income is realistic for you
If your estate is straightforward and comfortably within the allowances, you may not need to do much at all. If it is not, the earlier you look, the more options you have.
We are based at Church House in Caversham, on the Waitrose mini roundabout, and we sit down with people face to face to work through exactly this. If you would like to talk it over, get in touch.
This article is general information about UK tax rules and is not tax, legal or financial advice. Rates and thresholds are correct as at September 2026 and apply to the 2026/27 tax year. Scottish rates differ for income tax. Your own position will depend on your circumstances, so please take advice before acting.
