Updated: October 2026
The 2026 to 2027 tax year began on 6 April 2026, bringing a fresh set of allowances and a few important changes. Whether you are approaching retirement or already retired, using your allowances well can save you a lot of tax.
Here is what the new tax year means for your retirement planning, and a checklist to work through.
1. Income tax and the Personal Allowance
The Personal Allowance remains frozen at £12,570, and the freeze now runs until April 2031. The bands in England, Wales and Northern Ireland are:
| Income | Tax rate |
|---|---|
| Up to £12,570 | 0% (Personal Allowance) |
| £12,571 to £50,270 | 20% (basic rate) |
| £50,271 to £125,140 | 40% (higher rate) |
| Over £125,140 | 45% (additional rate) |
With the full new State Pension now £241.30 a week, it uses up almost all of your Personal Allowance. Any other income, such as a private pension or part-time earnings, is likely to be taxed. If you can, review how your income is structured to avoid slipping into a higher band. See will you pay tax on your State Pension in 2026/27?
2. Pension contributions and tax relief
- The annual allowance stays at £60,000 for most people.
- If you have already taken taxable money from a defined contribution pension, the money purchase annual allowance of £10,000 applies instead.
- If you have no earnings, you can still pay in up to £2,880 a year and the government tops it up to £3,600.
Even if you are semi-retired, paying into a pension can still be worthwhile, especially if you are a higher rate taxpayer.
3. ISA allowance and tax-free saving
Your ISA allowance has reset to £20,000 for 2026 to 2027. ISAs remain one of the most tax-efficient ways to save or invest, as interest, dividends and gains are tax-free and withdrawals do not count as income.
From April 2027, the cash ISA limit falls to £12,000 for under-65s, but if you are over 65 you can still put the full £20,000 in cash. Using your allowance early in the tax year gives your money more time to grow tax-free. Read our guide to ISAs for UK retirees.
4. Dividends and savings
- The dividend allowance is £500. From April 2026, dividends above that are taxed at 10.75% for basic rate taxpayers and 35.75% for higher rate taxpayers.
- The Personal Savings Allowance lets basic rate taxpayers earn £1,000 of interest tax-free, and higher rate taxpayers £500. If your other income is low, the starting rate for savings can make up to £5,000 more interest tax-free.
- Tax on savings interest rises by 2 percentage points from April 2027, so it may be worth moving savings into an ISA before then.
5. Capital gains tax
The capital gains tax annual exempt amount stays at just £3,000, with rates of 18% for basic rate taxpayers and 24% for higher rate taxpayers. Your main home is usually exempt. If you are selling shares or a second property:
- spread sales over more than one tax year if you can
- transfer assets to a spouse or civil partner so you can both use your exemptions
- use ISAs and pensions so future gains are sheltered
6. Inheritance tax planning
The inheritance tax nil-rate band stays at £325,000 and the residence nil-rate band at £175,000, both frozen until April 2031. A married couple or civil partners can still pass on up to £1 million tax-free in the right circumstances.
The big change is that from April 2027, most unused pensions will count towards your estate. Read what the pension inheritance tax change means for you, and now is a good time to:
- review your will and pension nominations
- use your annual gift allowances
- make a Lasting Power of Attorney if you do not have one
7. Action points for the year ahead
- Add up your expected income and check how close you are to a tax threshold
- Check your tax code is right in the HMRC app
- Use your ISA allowance, ideally early in the year
- Consider topping up your pension while you still get tax relief
- Spread capital gains across tax years
- Claim Marriage Allowance if one of you does not use your full Personal Allowance
- Review your will, pension nominations and inheritance tax position
Speaking to a financial adviser can help you tailor these steps. See our guide to financial advice for retirement planning.
For a summary of the latest rule changes, see the tax changes affecting UK pensioners.
Final thoughts
The start of a new tax year is the ideal time to review your retirement plan. With allowances frozen and several tax rises coming in 2027, small decisions now, like using your ISA allowance or timing a pension withdrawal, can make a real difference to how much you keep.
