Back in October 2025, Rachel Reeves delivered her second Autumn Budget as chancellor. Her announcements included tax threshold freezes, allowance changes, and tax rises. In fact, Reeves’ speech amounted to an estimated £26 billion of tax increases by 2029/30.

With the new tax year approaching, a number of these changes are due to come into force and could affect the tax you pay in 2026.

Keep reading for a closer look.

Fiscal drag looks set to continue until at least 2031

Income Tax

Fiscal drag occurs when inflation and living costs rise while tax thresholds remain the same. This has the effect of pushing more of your wealth into the tax regime, or pushing you into a higher tax bracket, increasing the amount you pay.

Certain tax thresholds have already been frozen for some time, and the freeze is set to continue.

Income Tax thresholds, originally frozen in April 2021, were further extended until 2031. As your wages increase over the next five years, more of your salary will be subject to tax. This is because the Personal Allowance is also frozen (at £12,570) and has been since 2021.

Pay rises could see your income reach, and then exceed, a frozen Income Tax threshold, increasing the rate of Income Tax you pay on that portion of your salary.

While the announcement of a freeze doesn’t directly affect your tax bill, it could see the amount you pay increase in 2026. The move is expected to raise £8 billion for the government.

Inheritance Tax on death

The thresholds at which Inheritance Tax (IHT) becomes due on a deceased’s estate have also been frozen for some time. The nil-rate band has been set at £325,000 since 2009, and the chancellor used her Autumn Budget to extend this freeze until 2031.

Similarly, the residence nil-rate band, which is triggered if you pass your main family home to a direct descendant, was also frozen at its current level. The residence nil-rate band has sat at £175,000 since 2020 and will remain at this level until at least 2031.

IHT is payable on your death, on the value of your estate that exceeds these amounts. The freezing of these thresholds has seen the government’s IHT take rise significantly in recent years, as more families are pulled into the IHT net.

Even if you don’t think IHT will be payable on your estate, it’s worth seeking professional financial advice to make sure. There are strategies we can help you employ to mitigate a potential liability, so get in touch.

Some tax rate rises were announced, effective from April 2026

While the Autumn Budget maintained the government’s manifesto promise not to raise the headline rates of Income Tax, National Insurance, or VAT, some tax rises were announced.

Dividends

If you hold investments that pay dividends or own a company and receive dividends to provide or supplement your salary, you’ll want to know about the announced Dividend Tax changes.

From April 2026, ordinary and upper rates of tax on dividend income will rise by two percentage points, while the additional rate remains unchanged.

• The ordinary rate will rise from 8.75% to 10.75%
• The upper rate will rise from 33.75% to 35.75%
• The additional rate will remain at 39.35%.

This is particularly important as the Dividend Allowance has been falling dramatically in recent years and stands at just £500 in 2026/27 (down from a £5,000 peak).

Property and savings

While a change was also announced to tax on property and savings, this won’t come into effect in 2026/27.

From April 2027, though, the rate of tax you pay on property and savings income will increase by 2% across all tax bands, from

• 20% to 22% for the basic rate
• 40% to 42% for the higher rate
• 45% to 47% for the additional rate.

Reeves suggested that 90% of taxpayers will still pay no tax on their savings, but it will be worth checking in with your balance before the changes next April.

Now is the time to get end of tax year ready, so get in touch if you need advice

The chancellor’s Budget is set to raise £26 billion in tax, so some of the changes will likely see your tax bill rise in 2026.

Remember, we’re on hand to help you mitigate the impact of this rise, whether through increasing your tax-efficient savings or investing, helping with budgeting, or implementing strategies to lower a potential IHT bill.

With the new tax year fast approaching, now is the time to check in with your allowances and top up your pensions or ISAs if you can afford to. Gifting allowances also reset, so be sure to contact us if you’d like help maximising your tax efficiency for 2025/26.

Get in touch

If you would like to discuss how best to prepare for the end of the tax year, or you have queries regarding any other aspect of your long-term financial plans, please email enquiries@futureplanningwm.co.uk or call 01793 575553.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.