2026 – A year of change: Why looking ahead could save you a fortune

It might feel like we have only just opened the first page of the 2025/26 tax year diary, and let’s be frank, many of us are still digesting the changes from the Autumn Budget.

While the ink is still fresh, there is a compelling reason to look ahead to 2026, a year that promises to be as eventful in terms of tax reforms as anything we have had in recent memory.

It might not feel like it, but the 2026/27 tax year will be here before you know it. There will be plenty who gave 2025/26 short shrift and will rue not preparing for it.

Don’t make this mistake; let’s look at what (we know so far) is coming in 2026 and what you can do to prepare for it.

Selling your business or assets? Plan now, save later

For entrepreneurs and investors thinking about selling a business or assets in the next couple of years, there’s an unwelcome storm brewing.

Business Asset Disposal Relief (BADR) (formerly Entrepreneurs’ Relief for those who like their nostalgia) has long been a go-to strategy for reducing Capital Gains Tax (CGT) on the sale of qualifying business assets.

Currently, the relief offers a 14 per cent CGT rate on the first £1 million of qualifying gains over a lifetime. This was, of course, recently pushed up from 10 per cent.

When the 2026/27 tax year arrives on 6 April 2026, the Government will increase the BADR rate again, this time to 18 per cent.

In other words, if you're sitting on a gain of £1 million, the tax bill under the current rules is £140,000. Come April 2026, that jumps to £180,000. That is (sadly) not pocket change.

The moral of the story? If you are considering a disposal, the time to act (or at least plan) is now.

Carried interest – from generous to grim

In a more technical, though no less painful change, carried interest (the share of profits that fund managers often receive) is getting a makeover.

Currently, carried interest is subject to CGT at 32 per cent (again, an increase that kicked in at the start of this tax year).

From April 2026, a new regime kicks in, and it is far more aggressive.

Rather than being treated as a capital gain, carried interest will now be taxed as trading income, meaning Income Tax rates up to 45 per cent, plus Class 4 National Insurance contributions (NICs) up to 2 per cent.

A handy multiplier of 72.5 per cent is being applied to adjust the gain, producing an effective tax rate of 34.075 per cent.

So, for anyone in private equity or fund management, this is going to bring big changes.

The Government is quite clearly closing the door on what it sees as overly generous tax treatment, and the impact on fund structures and remuneration planning will be important.

Making Tax Digital – no longer a distant thunder

Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) has been the can that keeps getting kicked down the road.

This all changes next year.

From April 2026, MTD will be phased in for sole traders and landlords with businesses or property that generate annual income over £50,000.

Quarterly updates to HM Revenue & Customs (HMRC) will become the new norm, replacing the single annual tax return with a drip-feed of digital reporting.

If that fills you with dread, fear not. With the right systems and support, this doesn’t have to be a burden.

That being said, if you cling on to spreadsheets or paper records, you will find yourself on the wrong side of the digital divide.

Plan ahead. Invest in software, as HMRC will not be providing any free software, streamline your record-keeping and make sure you are ready.

Inheritance Tax – reform at the farm gate

The much-loved (and heavily relied upon) Business Property Relief (BPR) and Agricultural Property Relief (APR) are also being reined in.

Currently, both BPR and APR can offer 100 per cent relief from Inheritance Tax (IHT) on qualifying business and agricultural property, a generous provision that has helped many family businesses and farms stay intact across generations.

From 6 April 2026, this full relief will only apply to the first £1 million of combined qualifying property. Anything over that threshold will receive only 50 per cent relief and effectively be taxed at 20 per cent.

In other words, family farms and businesses with assets above £1 million will now find themselves exposed to IHT.

Even more importantly, these rules will apply retrospectively to lifetime gifts made on or after 30 October 2024 if the donor dies on or after 6 April 2026 and within seven years of the gift.

This means that decisions made today could fall under the new regime even before it formally begins.

It has already caused well-publicised waves amongst the agricultural community and will impact the estate planning of many.

Those assuming their business or farm would pass tax-free to the next generation may need to revisit their Wills and gifting strategies – urgently.

So, what should you be doing now?

Foresight is the best form of defence. Planning for a sale? Do it with an eye on the new BADR rate.

Receiving carried interest? Explore structuring options before April 2026. Still not digital? Start the MTD process now before it becomes a scramble.

If you are thinking about succession or lifetime gifts, talk to someone about the implications of the new BPR and APR limits.

2026 may feel a long way off, but tax, like time, moves faster than we think. Better to be early than sorry. Let’s be clear there’s another Budget in the autumn too, and further change is guaranteed.

If you want to plan ahead for these changes now, our expert team of accountants are here to help. Speak to us today.

Dominic Bourquin