Tax E-News – February 2026

Welcome to the February 2026 edition of Tax E-News. We hope that you find this informative. Please contact us if you wish to discuss any matters in more detail.

February 2026

THERE’S STILL TIME FOR SOME YEAR END TAX PLANNING!

With the tax/financial year end approaching, now is a good time to check that you’re making the most of the available reliefs and allowances available to you. Please talk to us if you think any of the issues affect you.

Savings

If you have some spare cash, an obvious tax planning point would be to maximise your ISA allowances for the 2025/26 tax year (currently £20,000 per person). If you are 18 or over but under 40, you can open a Lifetime ISA to save for your first home or retirement. […]

Pension planning

You might also want to consider increasing your pension savings before 5 April 2026.

Under the current rules, the government adds to your pension contributions at the 20% basic rate. For instance, if you save £4,000 in a personal pension, the government tops this up to £5,000. If you are a higher rate taxpayer there is a further £1,000 tax relief when your tax liability is calculated, reducing the net cost of making the contribution to £3,000. […]

Dividends and company loans

The basic and higher rates of income tax applying to dividends will increase by two percentage points on 6 April 2026. The basic rate will increase from 8.75% to 10.75% and higher rate will increase from 33.75% to 35.75%. The additional rate will remain unchanged at 39.35%.

The increase to the higher rate will also apply for the purposes of the ‘penalty tax’ which is charged on some company loans to their shareholders, made on or after 6 April 2026. […]

Capital Allowances

Where a business has a 31 March or 5 April year end, the end of the tax year is a significant date as far as capital allowances are concerned. In order for new equipment to attract capital allowances, the expenditure must be incurred on or before the end of the accounting period. It is therefore important to consider the timing of expenditure and the possibility of accelerating planned investment. […]

Capital Gains Tax planning

You might wish to consider bringing forward capital gains to before 6 April 2026 if you haven’t used your £3,000 CGT annual exemption for 2025/26. […]

Paying Voluntary National Insurance Contributions

A retiring person needs to have 35 ‘qualifying years’ in order to claim the full state pension. For those with gaps in their record, usually due to not paying sufficient National Insurance Contributions (NICs), it is possible to ‘plug’ those gaps by paying Class 3 (Voluntary) NICs at £17.75 per week (£18.40 in 2026/27). […]

INHERITANCE TAX RELIEFS – A WELCOME U-TURN!

The government has announced that the proposed cap to the 100% rates of Agricultural Property Relief (APR) and Business Property Relief (BPR), which is due to apply from 6 April 2026, will be increased to £2.5 million from the £1 million previously announced.

The revised measure means that from 6 April 2026, individuals will be able to pass on £2.5 million of qualifying agricultural and business assets without attracting IHT.   […]

MTD FOR INCOME TAX – NEARLY THERE!

Making Tax Digital (MTD) for income tax will be mandated for a large group of self assessment taxpayers from 6 April 2026, with even more individuals being mandated in 2027 and 2028.

If your combined turnover from a sole trade or property business was over £50,000 in the 2024/25 tax year, you will likely be required to comply with the MTD for income tax rules from 6 April 2026. […]

EMPLOYMENT EXPENSES

From 6 April 2026, it will no longer be possible for employees to claim tax relief against their employment earnings for the costs of working from home. This change is being implemented because too many people were claiming the relief incorrectly. […]

SUPREME COURT RULES AGAINST HOTEL LA TOUR

In a recent ruling, the Supreme Court dismissed Hotel la Tour Ltd’s appeal in which they argued that they were allowed to reclaim input VAT incurred on the professional fees that they incurred during the sale of shares in the company that owned their luxury hotel in Birmingham.

HMRC’s position was that the sale of shares was a VAT-exempt transaction and the legislation disallows input tax reclaim when there is a direct and immediate link between the input (in this case, the professional fees), and an exempt supply. […]

DIARY OF MAIN TAX EVENTS

FEBRUARY  / MARCH 2026