New Tax Year 2026: Every Change That Hits Your Investments

Purple Flower

The new tax year started on 6 April 2026, and if you invest, several changes are now in play that could affect how much you keep.

Every April brings a fresh set of tax rules, but this year's batch is unusually heavy for investors. Dividend tax rates have gone up, AIM shares have lost a chunk of their inheritance tax perks, venture capital trust relief has been cut, and the government has confirmed that Cash ISAs will be capped from next year. If you have money in the market, or you're thinking about putting some in, here's what's actually changed and what to do about it.

What are the new dividend tax rates from April 2026?

Dividend tax rates have increased by 1.25 percentage points across the board. If you're a basic-rate taxpayer, you now pay 10% on dividend income above your £500 allowance (up from 8.75%). Higher-rate taxpayers pay 33.75% (up from 32.5%), and additional-rate taxpayers pay 39.35% (unchanged at the top, but the lower bands have shifted up).

In practical terms, if you hold dividend-paying shares outside a tax wrapper and receive £2,000 in dividends this year, you'll pay noticeably more tax than you did last year. The £500 allowance still applies, but everything above it costs more.

The message is clear: holding dividend-paying investments outside an ISA is getting more expensive every year.

What's happened to AIM shares and inheritance tax?

AIM shares used to qualify for 100% Business Property Relief, which meant they could be passed on completely free of inheritance tax after two years of ownership. From 6 April 2026, that relief has been halved to 50%. An AIM portfolio worth £200,000 that would previously have been fully exempt now only gets £100,000 of relief, leaving the other £100,000 potentially subject to 40% IHT.

This doesn't mean AIM investing is dead, but it does change the maths for anyone who was holding AIM shares primarily for the tax benefit. If your main reason for owning smaller, riskier companies was the inheritance tax perk, it's worth revisiting whether the risk still makes sense at 50% relief.

How has venture capital trust (VCT) relief changed?

VCT upfront income tax relief has dropped from 30% to 20% from this tax year. Previously, investing £10,000 into a VCT gave you £3,000 back as a tax reduction. Now it gives you £2,000. VCT dividends remain tax-free, and gains on disposal are still exempt, but the headline incentive is significantly less generous.

VCTs remain attractive for higher earners looking for tax-efficient income, but the reduced relief means you need to be more confident in the underlying investment quality. The tax tail should never wag the investment dog.

A smaller tax break still beats no tax break, but make sure the investment stands up on its own merits.

Is the ISA allowance still £20,000?

Yes, for this tax year (2026/27) the total ISA allowance remains £20,000. You can split this across Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs, and Lifetime ISAs however you like, as long as the total doesn't exceed £20,000.

However, the government has confirmed that from April 2027, Cash ISAs will be capped at £12,000 per year for anyone under 65. The remaining £8,000 can still go into a Stocks and Shares ISA. This means 2026/27 is the last tax year you can put the full £20,000 into cash savings inside an ISA wrapper.

If you've been sitting on the fence about whether to open a Stocks and Shares ISA, this timeline gives you an extra nudge.

Have income tax thresholds changed?

No. The personal allowance is still frozen at £12,570, and the higher-rate threshold remains at £50,270. These have been frozen since 2021 and won't move until at least 2028. As wages rise with inflation, more people are being pulled into higher tax bands without actually being better off. This is called fiscal drag, and it's one of the quietest tax rises the government has ever introduced.

If you got a pay rise this year, check whether it's pushed you closer to - or over - the higher-rate threshold. That affects not just your income tax, but also your dividend tax rate and your personal savings allowance.

A pay rise that pushes you into a higher bracket doesn't mean you earn less, but it does mean every extra pound costs more in tax.

What about capital gains tax?

The annual exempt amount for capital gains tax remains at £3,000. This was slashed from £12,300 just a few years ago, so if you're selling investments outside a tax wrapper, you have very little breathing room before CGT kicks in. Basic-rate taxpayers pay 18% on gains above £3,000 (for most assets), and higher-rate taxpayers pay 24%.

The combination of a tiny CGT allowance and higher dividend tax makes the case for ISA wrappers stronger than it's been in years. Every pound invested inside an ISA is completely shielded from both.

What should you actually do about all this?

Start with your ISA. If you haven't used your 2026/27 allowance yet, prioritise it. Every pound inside an ISA avoids dividend tax, capital gains tax, and income tax on interest. Given the direction of travel on all three, that protection is getting more valuable, not less.

If you have investments sitting in a general investment account (GIA), consider a "bed and ISA" move, where you sell holdings in your GIA and rebuy them inside your ISA. You may trigger a small capital gains tax bill, but the long-term savings on dividend and gains tax usually make it worthwhile.

Review your AIM holdings if inheritance tax planning was a factor. And if you use VCTs, assess whether the reduced 20% relief still justifies the illiquidity and risk.

Where Mona Fits

Mona's Stocks and Shares ISA gives you a simple, low-cost way to shield your investments from these rising tax rates. Whether you're moving existing investments into an ISA wrapper or starting fresh this tax year, everything inside Mona's ISA grows completely free from dividend tax, capital gains tax, and income tax. With this many tax changes landing at once, the ISA wrapper has never been more important.

The Bottom Line

April 2026 brought higher dividend taxes, reduced AIM inheritance tax relief, lower VCT incentives, and the announcement that Cash ISA limits are coming next year. The single most effective thing you can do is use your ISA allowance. It protects you from every one of these changes in one move, and the sooner you start, the more you benefit from compounding inside a tax-free wrapper.

Use your £20,000 ISA allowance this year. It's the best defence against a tax system that's quietly getting more expensive for investors.

For impartial information and guidance on tax changes for investors, visit MoneyHelper.org.uk.

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Join the waitlist

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New Tax Year 2026: Every Change That Hits Your Investments

Purple Flower

The new tax year started on 6 April 2026, and if you invest, several changes are now in play that could affect how much you keep.

Every April brings a fresh set of tax rules, but this year's batch is unusually heavy for investors. Dividend tax rates have gone up, AIM shares have lost a chunk of their inheritance tax perks, venture capital trust relief has been cut, and the government has confirmed that Cash ISAs will be capped from next year. If you have money in the market, or you're thinking about putting some in, here's what's actually changed and what to do about it.

What are the new dividend tax rates from April 2026?

Dividend tax rates have increased by 1.25 percentage points across the board. If you're a basic-rate taxpayer, you now pay 10% on dividend income above your £500 allowance (up from 8.75%). Higher-rate taxpayers pay 33.75% (up from 32.5%), and additional-rate taxpayers pay 39.35% (unchanged at the top, but the lower bands have shifted up).

In practical terms, if you hold dividend-paying shares outside a tax wrapper and receive £2,000 in dividends this year, you'll pay noticeably more tax than you did last year. The £500 allowance still applies, but everything above it costs more.

The message is clear: holding dividend-paying investments outside an ISA is getting more expensive every year.

What's happened to AIM shares and inheritance tax?

AIM shares used to qualify for 100% Business Property Relief, which meant they could be passed on completely free of inheritance tax after two years of ownership. From 6 April 2026, that relief has been halved to 50%. An AIM portfolio worth £200,000 that would previously have been fully exempt now only gets £100,000 of relief, leaving the other £100,000 potentially subject to 40% IHT.

This doesn't mean AIM investing is dead, but it does change the maths for anyone who was holding AIM shares primarily for the tax benefit. If your main reason for owning smaller, riskier companies was the inheritance tax perk, it's worth revisiting whether the risk still makes sense at 50% relief.

How has venture capital trust (VCT) relief changed?

VCT upfront income tax relief has dropped from 30% to 20% from this tax year. Previously, investing £10,000 into a VCT gave you £3,000 back as a tax reduction. Now it gives you £2,000. VCT dividends remain tax-free, and gains on disposal are still exempt, but the headline incentive is significantly less generous.

VCTs remain attractive for higher earners looking for tax-efficient income, but the reduced relief means you need to be more confident in the underlying investment quality. The tax tail should never wag the investment dog.

A smaller tax break still beats no tax break, but make sure the investment stands up on its own merits.

Is the ISA allowance still £20,000?

Yes, for this tax year (2026/27) the total ISA allowance remains £20,000. You can split this across Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs, and Lifetime ISAs however you like, as long as the total doesn't exceed £20,000.

However, the government has confirmed that from April 2027, Cash ISAs will be capped at £12,000 per year for anyone under 65. The remaining £8,000 can still go into a Stocks and Shares ISA. This means 2026/27 is the last tax year you can put the full £20,000 into cash savings inside an ISA wrapper.

If you've been sitting on the fence about whether to open a Stocks and Shares ISA, this timeline gives you an extra nudge.

Have income tax thresholds changed?

No. The personal allowance is still frozen at £12,570, and the higher-rate threshold remains at £50,270. These have been frozen since 2021 and won't move until at least 2028. As wages rise with inflation, more people are being pulled into higher tax bands without actually being better off. This is called fiscal drag, and it's one of the quietest tax rises the government has ever introduced.

If you got a pay rise this year, check whether it's pushed you closer to - or over - the higher-rate threshold. That affects not just your income tax, but also your dividend tax rate and your personal savings allowance.

A pay rise that pushes you into a higher bracket doesn't mean you earn less, but it does mean every extra pound costs more in tax.

What about capital gains tax?

The annual exempt amount for capital gains tax remains at £3,000. This was slashed from £12,300 just a few years ago, so if you're selling investments outside a tax wrapper, you have very little breathing room before CGT kicks in. Basic-rate taxpayers pay 18% on gains above £3,000 (for most assets), and higher-rate taxpayers pay 24%.

The combination of a tiny CGT allowance and higher dividend tax makes the case for ISA wrappers stronger than it's been in years. Every pound invested inside an ISA is completely shielded from both.

What should you actually do about all this?

Start with your ISA. If you haven't used your 2026/27 allowance yet, prioritise it. Every pound inside an ISA avoids dividend tax, capital gains tax, and income tax on interest. Given the direction of travel on all three, that protection is getting more valuable, not less.

If you have investments sitting in a general investment account (GIA), consider a "bed and ISA" move, where you sell holdings in your GIA and rebuy them inside your ISA. You may trigger a small capital gains tax bill, but the long-term savings on dividend and gains tax usually make it worthwhile.

Review your AIM holdings if inheritance tax planning was a factor. And if you use VCTs, assess whether the reduced 20% relief still justifies the illiquidity and risk.

Where Mona Fits

Mona's Stocks and Shares ISA gives you a simple, low-cost way to shield your investments from these rising tax rates. Whether you're moving existing investments into an ISA wrapper or starting fresh this tax year, everything inside Mona's ISA grows completely free from dividend tax, capital gains tax, and income tax. With this many tax changes landing at once, the ISA wrapper has never been more important.

The Bottom Line

April 2026 brought higher dividend taxes, reduced AIM inheritance tax relief, lower VCT incentives, and the announcement that Cash ISA limits are coming next year. The single most effective thing you can do is use your ISA allowance. It protects you from every one of these changes in one move, and the sooner you start, the more you benefit from compounding inside a tax-free wrapper.

Use your £20,000 ISA allowance this year. It's the best defence against a tax system that's quietly getting more expensive for investors.

For impartial information and guidance on tax changes for investors, visit MoneyHelper.org.uk.

Join Mona’s early access waitlist

Join the waitlist

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