Pre-April 2026 planning opportunities

The 2025 Autumn Budget introduced significant tax changes, some of which are effective from April 2026, affecting dividends, rental income, Enterprise Management Incentives (EMI) schemes, inheritance tax reliefs, and more. Businesses and individuals need to plan proactively to optimise tax efficiency and manage the impact on cash flow.

Some of the upcoming key changes include:

• Dividend tax rates increase: From April 2026, dividend tax rates rise by 2%, making dividends less tax-efficient compared to salary, with basic rate moving to 10.75% and higher rate to 35.75%. Shareholders should review their remuneration strategies to optimise tax outcomes, to optimise tax outcomes.  
• EMI scheme expansions: EMI qualifying criteria will become more accessible from April 2026, with the employee count limit increasing to 500, asset cap rising to £120m, and company option limits expanding, and  exercise periods extending to 15 years. Companies should audit and refresh EMI schemes as part of their reward strategies.  
• Temporary non-resident rules tightened: Individuals returning to the UK within five years may face UK taxation on gains and income realised abroad, including dividends from close companies and offshore structures. Full records and careful timing of distributions are essential.  
• Inheritance tax reliefs restricted: From April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) will reduce from 100% to 50% subject to threshold. However, the relief threshold will increase to £2.5m, allowing up to £5m to be transferred between spouses. Early restructuring and transfers will be critical.  
• EOT CGT relief halved: From November 2025, Capital Gains Tax relief on sales to Employee Ownership Trusts (EOTs) dropped from 100% to 50%, with no Business Asset Disposal Relief (BADR) available, leading to an effective 12% tax rate. Despite this, EOTs remain culturally beneficial although alternatives like Private Equity or MBO may be preferred.  

Some of the future changes announced include:

• Rental income tax rises: From April 2027, property income tax rates increase by 2% across basic, higher, and additional rates. Landlords should review ownership structures, time repairs to optimise reliefs, and consider incorporation benefits carefully.
• Mansion tax surcharge introduced: From April 2028, an additional council tax surcharge applies to residential properties valued over £2 million, impacting cash flow for owners. Reviewing property valuations and ownership structures is advised for planning.  
• Salary sacrifice changes in 2029: From April 2029, pension contributions via salary sacrifice over £2,000/year will attract National Insurance Contributions, reducing the tax advantages. Employers should model total rewards, shift to direct contributions, and update payroll and communications.  

Pre-April 2026 planning opportunities:

To manage cash flow effectively and optimise tax efficiency ahead of April 2026, both individuals and businesses should start planning ahead of the proposed changes and consider:

• Reviewing remuneration strategies and model income/dividend extraction ahead of increased dividend tax rates.
• Securing inheritance tax reliefs by reviewing business asset structures, and use current agricultural and business property reliefs through restructuring, transfers, or gifts and trusts.
• Bringing forward deductible rental expenses.
• Maximising pension contributions via the existing salary sacrifice scheme.
• Carefully plan any departures from the UK.

For more information on anything raised within this article or to discuss the tax planning options for your individual circumstances, please speak to your usual contact at James Cowper Kreston, or one of our Business Tax or Private Client Services experts here.