Tax year end 2026: How will the recent Budgets shape your tax year end client conversations?

Tax year end always creates a natural moment for clients to take stock. But this year feels different. The two Budgets in 2024 and 2025 have both shifted the landscape in ways that will genuinely change client behaviour – from how they draw retirement income, to the way businesses think about succession, to the role of estate planning in their financial plan.

For advisers, this brings fresh need and opportunity to guide clients with clarity and confidence. The changes may be technical, but the impact is human: families, business owners, and retirees all want reassurance that they’re protected, prepared, and making good decisions at the right time.

As we approach the end of the 2025/26 tax year, how will these announced changes affect planning strategies as they take effect over the coming years? What, if any, action needs to be taken as we move through each tax year?

There’s a lot for clients and financial planners to discuss.

DC pensions, IHT changes and the impact on decumulation

As is well understood now, DC pension schemes will be assessed for inheritance tax from April 2027. This is in addition to income tax being charged on beneficiaries where death takes place after the pension member’s 75th birthday. 

What questions and challenges do these changes raise for clients and advisers?

There will undoubtedly be occasions where some clients change their decumulation strategy after April 2027. Where once many would use their pension as a form of intergenerational trust fund, many will now consider using it as a retirement income tool.

In the run up to April 2027, the challenging question is whether income should be drawn in the preceding tax years and used for planning? Depending on your client’s circumstances, there may be a further one or two tax years in which basic rate income can be drawn for planning purposes. This needs to be balanced with the fact your client is drawing income which would otherwise remain IHT-free until April 2027.

The correct path depends upon client circumstances and objectives, reinforcing the value of a clear, thoughtful decumulation strategy. Clients need to understand how income tax, IHT and their own income needs intersect. 

There’s no right answer for all but an important conversation as we move towards tax year end.

Frozen IHT thresholds make planning more vital than ever

As the 2025 Budget extended the freeze on IHT bands through to April 2031, continued growth in asset prices is expected to draw more individuals into IHT and raise the charges faced by those already subject to it.

Lump-sum gifting, both outright and into trust, will likely play an important role. The use of the annual IHT gifting allowances should be considered, where appropriate, each and every tax year. Compounding these allowances over time can make a significant difference.

Ensuring clients take advantage of the generous gifts from normal expenditure exemption is important as one tax year closes and another opens. Placing a protection policy in trust, for example, can fund the IHT liability, providing the family with liquidity and removes the pressure to sell assets quickly.

Mitigating the impact of fiscal drag each tax year

With the 2025 Budget announcing income tax thresholds would be frozen until 2031, many clients will drift into higher bands of income tax as their income rises. This fiscal drag can be extremely impactful. The OBR has estimated that the freeze in these tax thresholds from 2022/23 to 2030/31 will raise an additional £55.5 billion in 2030/31.

The OBR predicts that this policy will result in an additional 5.2 million individuals paying income tax, and 4.8 million more people paying the higher rate in 2030/31. The OBR also estimates that 600,000 more individuals will have moved to the additional rate band. The proportion of taxpayers paying the higher or additional rate is forecast to rise from 15% in 2021, to 24% in 2030/31.

_{Source : House of Commons Library, “The impact of freezing the income tax personal allowance and higher rate thresholds” (CBP‑9186, 2025).}

This creates a valuable opportunity to remind clients of the tax fundamentals they should revisit every tax year.

Pension contributions each tax year, which offer up-front tax relief, will become an even more valuable planning tool for individuals moving through tax bands as their income rises. By supporting efficient retirement funding and helping to mitigate tax 'cliff edges,' making an annual pension contribution remains highly attractive for many.

Making full use of other annual tax allowances and exemptions – such as ISAs, the dividend allowance or the savings allowance – could also benefit clients where an income tax charge increases.

Even when the amounts are small, every pound of tax saved makes a difference. Drawing income tax efficiently reduces the gross income needed to achieve the same net result, helping clients’ savings last longer throughout retirement.

Salary sacrifice, consider the pre and post 2029 impact of the changes

Salary sacrifice is currently a powerful planning tool, but changes in April 2029 will restrict full employer and employee NIC relief to the first £2,000 each tax year.

That doesn’t mean clients should rush – it means advisers have time to plan. For some, maximising salary sacrifice in the tax years before the changes may be beneficial; for others, understanding the impact after 2029 is essential. 

Ensuring clients understand the specific impact and make decisions based on the facts is essential. Even following the changes, the up-front tax relief afforded by pensions will continue to be very attractive for many, especially where employer matching is available.

Don’t forget the fundamentals: the quiet power of compounded annual allowances

Among all the policy changes, it’s easy for clients to overlook the basics. But using tax allowances year after year is where much of the long‑term value lies.

The effect compounds. Clients often don’t see this unless it’s explained, and tax year end is the perfect moment to remind them.

This is the human side of tax planning: helping clients stay on track, year after year, and supporting them to make the most of the rules available – without pressure, but with purpose. 

A final thought

The recent changes may feel like challenges, but they’re also opportunities. When advisers lead these conversations early – whether on income, inheritance or business continuity – it reinforces their role as a trusted partner in their clients’ financial lives.

As we approach tax year end, the most valuable thing we can offer is clarity. Bringing calm, structured, practical guidance helps clients feel prepared for what’s ahead, confident in the decisions they’re making, and supported for the long term.

Simon Martin, Technical Development Manager

Find out more

Speak to your usual Aviva contact or visit our Tax Year End page to find out more. Tax year end hub - Aviva