It’s never too early to start preparing for the next tax year. This is especially true now, as several important tax changes are due to take effect from 6 April 2027.
These reforms could significantly affect your long-term financial plan, particularly your pensions, savings, and estate plans.
Taking the initiative and preparing for these changes early could help you keep your wealth as tax-efficient as possible and avoid unnecessary costs.
However, recent research suggests that public awareness of planned tax changes is low. Pensions Age reveals that 89% of UK adults have little or no awareness of the upcoming reform of Inheritance Tax (IHT) rules regarding pensions.
Keep reading to learn about three important tax reforms coming in 2027 and find out how we can help you prepare.
1. Most unused pensions will no longer be exempt from Inheritance Tax
When you pass away, your beneficiaries may have to pay IHT on your estate if its value exceeds certain thresholds.
You can pass on up to £325,000 without triggering an IHT charge. You may be entitled to an additional £175,000 IHT-free allowance if you leave your home to a direct descendant, such as a child or grandchild. Assets you pass to a spouse or civil partner are generally exempt from IHT, regardless of their value.
Any portion of your estate that exceeds these thresholds is subject to IHT, and the standard rate is 40%.
Currently, pensions normally sit outside your estate for IHT purposes. As such, they offer an effective way to pass wealth on to your loved ones tax-efficiently.
However, from 6 April 2027, most unused pension wealth will no longer be exempt from IHT. This could mean that your family is more likely to face an IHT bill or that the amount payable increases.
Indeed, the UK government estimates that by 2027/28, 10,500 estates will have an IHT liability where previously they would not have. Moreover, the average IHT bill is expected to increase by £34,000.
As such, if your estate plan centres on using your pension as a tax-efficient wealth transfer tool, you might benefit from speaking to a financial planner who can help you review your options.
2. The annual Cash ISA allowance will be reduced
ISAs are a valuable way to save and invest tax-efficiently because any interest or investment returns you earn are free from Income Tax and Capital Gains Tax.
In the 2026/27 tax year, you can contribute up to £20,000 across all your ISA accounts. You can choose how to split this, although Lifetime ISAs have an annual subscription limit of £4,000 up to the age of 50.
For example, you could put £10,000 in a Cash ISA and £10,000 in a Stocks and Shares ISA, or you might choose to put the full £20,000 into a single account.
This is set to change for some people from April 2027.
In her 2025 Autumn Budget, Chancellor Rachel Reeves confirmed that while the total ISA limit will remain at £20,000, the Cash ISA limit will be reduced to £12,000 each tax year for individuals under 65.
This could mean that more of your savings are exposed to Income Tax. If you’re a higher- or additional-rate taxpayer, this may have a significant impact on your annual tax bill.
3. Property and savings tax rates will increase
From 6 April 2027, Income Tax rates on interest earned from savings held outside an ISA that exceed your Personal Savings Allowance and property rental income will increase by two percentage points.
The new rates will be:
- 22% for the basic rate
- 42% for the higher rate
- 47% for the additional rate.
This change could mean that more of your savings interest is subject to Income Tax, increasing your overall tax burden – especially if you’re a higher earner with multiple assets. As a result, you might want to reconsider relying on cash savings as a tax-efficient strategy for building wealth.
If you’re a landlord, higher taxes on rental income could reduce net returns, making your rental properties less profitable.
We can help you prepare for these changes now
Seeking professional advice and preparing early for these upcoming changes could ensure you manage your wealth as tax-efficiently as possible and keep your financial plans on track.
We can help by reviewing your pensions, savings, and investments to assess how the planned reforms could affect you.
By modelling different scenarios – such as how much IHT your estate might face under current and future rules – our financial planners can identify tax-efficient adjustments that could mitigate the potential impact of the changes. For example, you might want to give away more of your wealth during your lifetime to make use of annual IHT gifting allowances and reduce the size of your estate.
Acting now ensures you have plenty of time to structure your savings and investments strategically ahead of April 2027.
Get in touch
If you’d like help reviewing and adjusting your financial plan in preparation for the tax changes planned for April 2027, we’d love to hear from you.
To find out more, please email hello@bluewealth.co.uk or call us on 0117-332 0230.
Please note
The content of this newsletter is offered only for general informational and educational purposes. It is not offered as, and does not constitute, financial advice.
Blue Wealth Ltd is not responsible for the accuracy of the information contained within linked sites.
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.
The Financial Conduct Authority does not regulate estate planning, cashflow planning, or tax planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Approved by Best Practice on: 15/5/2026
