The Chancellor’s Budget includes several important tax changes taking effect from April 2027, and some taxpayers may benefit from reviewing their arrangements before the current tax year ends.
Although many of the Budget announcements concern changes that will not take effect immediately, there are several that deserve attention now, particularly for business owners, landlords, savers and individuals with substantial pension funds.
Here are the main issues worth considering before 6 April 2027.
Selling a business? Check the timing
From 6 April 2027, the lifetime limit for Business Asset Disposal Relief will fall from £1 million to £500,000. This could significantly increase Capital Gains Tax liabilities for business owners planning to retire or sell qualifying shares or business interests.
However, the Budget also introduces a new Founders’ Relief from 6 April 2027, offering a 10% Capital Gains Tax rate on up to £10 million of qualifying lifetime gains. This new relief is intended for founders and significant early investors in high-growth, innovative UK companies, although the detailed qualifying conditions remain subject to consultation.
The interaction between these two changes makes the timing of business disposals particularly important. Some owners may benefit from completing a sale before April 2027, while others could potentially benefit from waiting until the new relief becomes available.
Anyone considering a business disposal should take professional advice before agreeing terms or entering into binding contracts.
Landlords face higher tax rates
From 6 April 2027, the proposed Income Tax rates applying to property income will increase to 24%, 44% and 49% in England, Wales and Northern Ireland. Scotland has separate powers over these rates.
For landlords already experiencing pressure from mortgage interest, repairs and other running costs, the changes could further reduce their after-tax rental income.
It would be sensible to review rental forecasts, financing arrangements and future property plans before the new tax year. Landlords contemplating a sale or restructuring should also consider the wider tax consequences before taking action.
Savings interest will be taxed more heavily
Taxable savings income will also face higher rates from April 2027, increasing to 24%, 44% and 49% across the UK.
The changes will not affect interest sheltered within ISAs, and the Personal Savings Allowance and other existing savings reliefs will remain relevant.
Nevertheless, individuals holding substantial savings outside tax-free accounts may wish to review their arrangements. Married couples and civil partners should also consider whether the ownership of savings remains appropriate in light of their respective tax positions.
Pension savings and Inheritance Tax
From 6 April 2027, most unused pension funds and pension death benefits will be included when calculating Inheritance Tax on deaths occurring on or after that date.
This could have a significant effect on estate planning, particularly where pension funds have deliberately been preserved to pass wealth to children or other beneficiaries.
Individuals with substantial pension savings should review their wills, pension nominations and wider estate arrangements. However, withdrawing pension funds simply to avoid a potential Inheritance Tax liability may create an immediate Income Tax charge and could reduce future retirement security.
Any changes should therefore be considered carefully.
Planning investment in equipment?
The Budget introduces a new 50% first-year capital allowance for qualifying expenditure incurred from 1 January 2027. It also reduces the main writing-down allowance to 12% from 1 April 2027 for Corporation Tax and 6 April 2027 for Income Tax.
Businesses contemplating significant purchases of plant, machinery or equipment should consider whether the timing of expenditure could affect the tax relief available.
Other allowances, including the Annual Investment Allowance, may still provide more favourable relief, so the best approach will depend on the circumstances.
Employers should prepare for payroll changes
From April 2027, employers will be required to payroll the taxable value of company cars, vans, fuel and medical benefits, with most other taxable benefits following from April 2028.
Employers should review their existing benefit arrangements, payroll software and employee records before the new requirements take effect.
Making Tax Digital: Time to prepare
Sole traders and landlords with qualifying income above £30,000 are due to join Making Tax Digital for Income Tax from 6 April 2027.
The Budget provides a useful concession: taxpayers required to join in April 2027 will not receive late submission penalty points for quarterly updates during the 2027–28 tax year.
However, the requirement to maintain digital records and submit quarterly updates remains. Those affected should use the remaining months to establish suitable software and record-keeping arrangements.
Other changes worth considering
From April 2027, the trading allowance will increase from £1,000 to £3,000, potentially simplifying tax reporting for individuals with modest trading income.
There are also changes to the VAT treatment of services purchased from overseas, which could increase costs for certain businesses that are not VAT registered.
What should you do now?
Not every Budget announcement requires immediate action, and some proposals remain subject to legislation or consultation. Nevertheless, reviewing your circumstances before April 2027 could identify worthwhile planning opportunities.
If you are considering selling a business, changing property investments, reviewing pension arrangements or making significant business purchases, please contact us before taking action.
If you feel this alert could help a business colleague or family member, please feel free to share it with them.
