Clare Moffat, pensions and tax expert at Royal London, outlines the key financial changes taking effect this April, from higher State Pension payments and a rise in the national living wage to tax changes that could leave many people worse off.
Clare Moffat, pensions and tax expert at Royal London, looks at what’s changing this April:
“April 6 will usher in a range of changes that will impact people’s finances, so now is the time to take stock for the financial challenges and opportunities that lie ahead.
Key Changes:
- National minimum wage increase
- Inheritance tax (IHT) reforms
- 2% dividends tax rate increase
“While it’s good news for pensioners and those on the national living wage from April 6, good news is thin on the ground elsewhere, particularly among business owning employers facing a challenging new tax year.
“Thanks to the triple lock, those in receipt of the State Pension will enjoy an increase of 4.8%, taking the weekly amount to £241.30.
“The national living wage also rises by fifty pence an hour, increasing to £12.71. However, the flip side is that this pushes up costs for employers at a time when many businesses are struggling to deal with inflationary pressure from global events.
“In addition, dividend tax at the basic and higher rate will increase by 2%. And as many business owners take a large proportion of their income as dividends, this signals a further squeeze on earnings.
“April 2026 also sees a £2.5m cap on Agricultural and Business Property Relief, meaning inheritance tax (IHT) may be payable by their beneficiaries on the business owner’s death where these assets were previously exempt.
“And while it’s not one for this tax year, the clock starts counting down to 6 April 2027, when pensions become subject to IHT. This has the potential to see many people brought into scope of IHT for the first time, or for IHT bills to increase.
“And finally, another year with a frozen personal allowance, with income tax bands and IHT thresholds frozen until 5 April 2031, means many people are likely to have increased financial planning needs.”
