Bonus episode: What does the 2026/27 tax year mean for your finances?

The following is a transcript of a bonus podcast episode of The Pension Confident Podcast. Listen to the episode or scroll on to read the conversation.

Takeaways from this episode

• What is the tax year? - the new tax year started on 6 April 2026, which resets your annual tax allowances. This is an opportunity to set financial goals, such as utilising your savings accounts like ISAs and pensions.
• Minimum and statutory pay for workers - the National Living Wage for those aged 21 and over will rise from £12.21 to £12.71 per hour. Statutory Sick Pay (SSP), along with other types of leave, have gone up.
• The State Pension and ‘triple lock’ - both the basic and new State Pension have risen by 4.8%, in line with the triple lock. The full new State Pension is now £241.30 per week, bringing it just under the £12,570 Personal Allowance threshold.
• Frozen thresholds on earnings and savings - the freezing of income tax and personal tax-free allowances means that more people may be pushed into higher tax brackets as their salaries increase.
• Pension contributions and compound interest - for each tax year, you can usually get pension tax relief on personal contributions up to 100% of your annual salary, capped at a maximum of £60,000.

PHILIPPA: Welcome back. Today’s bonus episode is all about the new tax year and what it could mean for your finances. There have been a lot of policy changes since Labour won the general election in 2024, but it’s only now at the start of the 2026/27 tax year that some of the Chancellor’s announcements actually come into force.

So what’s changed? Well, plenty, from the Minimum Wage to tax bands, sick pay, and the State Pension - a bunch of changes came into effect on Monday 6 April. So in this episode, we’re going to fill you in on everything you need to know about them and why they might matter to you.

I’m Philippa Lamb, and if you’ve not already subscribed to the podcast, why not click that button right now before we start? Here with me to dig into the changes that might hit your wallet this new tax year, I have Maike Currie, PensionBee’s VP Personal Finance. Welcome back, Maike.

MAIKE: Thank you.

PHILIPPA: So let me just give you the usual disclaimer before we start. Please remember, anything discussed on this podcast shouldn’t be regarded as financial advice or as legal advice, and when investing, your capital is at risk. 

What is the tax year?

PHILIPPA: Now look, Maike, should we start with the absolute basics? Because obviously this podcast, it’s for everyone, not just expert investors. Every year there’s a new tax year. It doesn’t start on the 1 January. It begins on 6 April, right? Confusing but true. So for people who are new to all of this, what’s the tax year?

MAIKE: Well, we don’t make it easy for ourselves, do we? Because we’ve got a school year starting in September, we’ve got the new year starting in January, and then by some quirk of the Gregorian calendar, the tax year starts on the 6 April.

Now the key thing to really remember, or the key way to think about the tax year, is to think of it as ‘the great refresh’. Everything gets refreshed in terms of your earnings in that year, what your thresholds are, how much you can contribute into a pension, how much you can contribute into an ISA, allowances around National Living Wage, things like the State Pension. And it’s really useful to refresh your knowledge and really get up to speed as to: what are those new allowances, have there been any changes, are there any quirks that I should be aware of?

PHILIPPA: Excellent moment for a financial review.

MAIKE: Absolutely. It’s the time, we call it, for the great spring clean of your finances.

PHILIPPA: OK, so it’s an important date. It’s happening right now.

Minimum and statutory pay for workers

PHILIPPA: Now, one of the big headlines has been the new National Minimum Wage - new in the sense that it’s gone up. What’s the difference between the [National] Minimum Wage and the [National] Living Wage?

MAIKE: Well, this can confuse people a bit, but really it comes down to age brackets. If you’re over age 21, you get the National Living Wage. If you’re under age 21, say 18 to 20, or even under 18, you get the National Minimum Wage.

PHILIPPA: Got it. So if you’re over 21 and you’re doing a standard 37.5-hour working week, say, what sort of annual salary would you now be expecting then if you were on the new National Living Wage?

MAIKE: So the National Living Wage has increased by 50p an hour. It’s now £12.71.

PHILIPPA: What difference is this going to make to your annual salary?

MAIKE: The difference is £900. If we give the annual amount and you’re working that full 37.5 hours a week, that’ll take you to £24,784.50.

PHILIPPA: OK, now sick pay. We’ve also seen significant changes, haven’t we, on Statutory Sick Pay (SSP) as part of the Employment Rights Bill reforms, and we’ve got a rate increase there too. Just to remind us though, what is it? Who’s eligible?

MAIKE: So there’s been a lot of changes on that front. Good news for employees, less good news for employers because it does increase the risk. It’s a day one right and it’s now between £123.25 a week or 90% of earnings depending [on] what’s lowest. I’ll also say there’ve been significant changes to maternity, paternity, and bereavement leave, but we’ll give you some more details of that in the show notes.

The State Pension and ‘triple lock’

PHILIPPA: OK, moving on to the State Pension, that’s gone up. We’ll talk about how [much] this is for everyone, don’t we? But actually, you do have to have paid National Insurance contributions, don’t you, to get it?

MAIKE: Absolutely. That’s the thing no one realises. Everyone thinks you will just kind of reach State Pension age -

PHILIPPA: yeah -

MAIKE: and you’ll get the State Pension, but actually it depends on how many years of National Insurance contributions you make. To get some State Pension, you need to make at least 10 years minimum National Insurance contributions. To get the full [new] State Pension, you need to have paid 35 years of National Insurance contributions.

PHILIPPA: OK. And if you don’t know how much you’ve paid, you can go on the government website and see where -

MAIKE: That’s right. It’s worth checking. It’s something I do quite often to check. Are there any gaps in your National Insurance contributions? And if there’s something you can do about it.

PHILIPPA: OK. So good news that it’s gone up. How much?

MAIKE: So what we need to know about the State Pension is that it increases each year in line with the ‘triple lock’. The triple lock, a piece of legislation that was brought in [several] years ago now by the Coalition Government, and it means that the State Pension increases by whatever is largest between inflation, wage growth, and 2.5%.

PHILIPPA: So this year, where are we at on the numbers?

MAIKE: So this year we see the [new] State Pension going up to £241.30 a week, and overall that’s the full [new] State Pension. That’ll bring you to an amount of £12,547 for this full [new] State Pension. Now what is really interesting about that amount is that it’s within our Personal Allowance, the amount we can earn without paying basic rate tax, which is £12,570. 

So you can see the difference between the Personal Allowance and the [new] State Pension, if you get the full [new] State Pension, is now less than £30, which means a lot of people in retirement on the [new] State Pension might in a year’s time or so start paying tax on their State Pension alone.

PHILIPPA: And this is new, isn’t it?

MAIKE: I mean, really new. This is new.

PHILIPPA: OK, so that’s the new State Pension. What about the basic State Pension?

MAIKE: The basic State Pension, that amount is going up to £184.90 per week.

Frozen thresholds on earnings and savings

PHILIPPA: And this brings us to a thing called frozen tax thresholds.

MAIKE: Yes, it’s really interesting. And the best description I’ve heard of this has been from an economist who called the UK’s tax system a bit resembling a Manhattan skyline. We have massive cliff edges, and we know that those personal allowances have been frozen now for a couple of years. And they’ll remain frozen until 2028.

And in simple terms, what this means is when you get a pay rise in line with inflation, you’ll end up paying more tax because the threshold at which you start paying tax, be that basic rate tax, higher rate tax, or additional rate tax, has stayed frozen. It’s also called ‘stealth tax’.

PHILIPPA: Yes. 

MAIKE: It’s the saying, you know, plucking the goose for the maximum amount of feathers with the least amount of hissing. And it just means that more and more of us are being pulled into higher rate tax bands and we’re paying more tax.

PHILIPPA: Yeah, so the government recoups more tax without actually putting taxes up.

MAIKE: Exactly.

PHILIPPA: Got it. Savings allowances, because it’s not just your income or your benefits that are changing with a new tax year. Savings allowances, they change too, don’t they? So this is how much the government lets you stash away, as you said, before you pay tax. But let’s look at the actual bands here. Should we start with Individual Savings Account (ISAs)?

MAIKE: Yes, so these are really, really important, especially because we’ve got those frozen tax thresholds. So savings allowances in the UK are still very generous and it’s worth making the most of those. So if you’re looking at a Stocks and Shares ISA, the maximum you can put in that every year is £20,000.

Now you could split that between, say, a Cash ISA and a Stocks and Shares ISA, putting £10,000 in one and £10,000 in the other. You don’t have to use the full allowance. A key change that’s going to kick in come the new tax year, April 2027, is a massive change to Cash ISAs brought in by the current Chancellor, Rachel Reeves, which means for anyone under the age of 65, that allowance is going to reduce to £12,000, which is a significant change.

PHILIPPA: So this is next [tax] year, not now.

MAIKE: Next year from the 6 April [2027], when that new tax year kicks in.

PHILIPPA: And it’s only Cash ISAs. So if you’ve got Stocks and Shares ISA, you’ll still be able to put £20,000 in each year if you have it.

MAIKE: That’s right.

PHILIPPA: If you have cash, no.

MAIKE: So yes, you can still put £20,000 into a Stocks and Shares ISA regardless of your age. The Cash ISA allowance, however, is changing for anyone under the age of 65 from the new tax year, that’s 6 April 2027.

PHILIPPA: So next year, not this year.

MAIKE: Exactly, in a year’s time, for those under age 65, they can only put in £12,000 into a Cash ISA. It’s a significant change; it’s a contentious change. The thinking behind this is that it will bring more of us into the world of investing. The Chancellor wants to encourage us to invest in the stock market more. Whether this will work, yeah, remains to be seen.

PHILIPPA: Yeah, so if you’re under the age of 65 right now and you’re interested in Cash ISAs, you - now might be the time for you to think about it.

MAIKE: Yes, but of course make sure you look at what rates are available there and remember that if you’re in this for the long-term, over the long term, five years or more, there’s research out there, something called the Barclays Equity Gilt Study, that shows over the long term the stock market, even though we know it can be volatile, and it’s - the last few months have been proof of that, but over the long term, the stock market does tend to outperform cash.

PHILIPPA: Yeah, always a very personal decision, this, isn’t it? Now, let’s talk about Capital Gains Tax allowances. This, of course, is the tax you have to pay on anything you sell that’s gone up in value, well, since you got it, really. What’s changing there?

MAIKE: At the moment, the Capital Gains Tax allowance is £3,000. I think the key thing to remember there is it has come down in recent years. If you want to avoid paying Capital Gains Tax, shelter investments within that ISA, that Stocks and Shares ISA, because any growth within a Stocks and Shares ISA, whether you have Capital Gains or whether you have dividends paid, all growth, all income is tax-free forever, and you can withdraw the money when you need it tax-free.

PHILIPPA: And this is the key benefit, isn’t it?

MAIKE: It is.

Pension contributions and compound interest

PHILIPPA: OK, let’s just loop back to pensions. We talked about State Pension, but what about personal and workplace pensions?

MAIKE: So pensions are really generous. They are ultimately the key long-term wealth generator, and they enable you to unlock the power of compound interest. Each year you can put in £60,000 or the maximum in line with your salary. So let’s say I’m earning £40,000, the maximum I can put into a pension is £40,000. There’s also something really useful known as ‘carry forward rules’, which means I can carry forward unused allowances from the previous [three] tax years.

PHILIPPA: What if you don’t earn anything at all? Can you still pay into a pension?

MAIKE: You can, and it’s really important. You can [usually] pay up to £2,880 into a pension, and then with [basic rate] tax relief from the government to the value of £720, that amount goes up to £3,600. That’s also the same amount you can put into a Junior Pension for children. Now, this might not sound like a lot of money, but especially for children over the long term, with the power of compound interest, that pension can really grow.

PHILIPPA: Yeah, and I’m thinking about women maybe taking time out for whatever caring responsibilities, just still, even if they’re not earning, just paying that little bit in.

MAIKE: Very good point. Women, especially if you’ve taken a career break and you’re not putting anything into your pension, talk to your partner, talk to your parents to put that money into a pension for you, or make the most of carry forward allowances if you have unused allowances and you’ve just come back into employment.

PHILIPPA: Yeah, now next month we’re going to be diving a bit deeper into all the rules around pension contributions, so stay tuned for that one. Maike, that’s so helpful. Thank you so much.

MAIKE: Thank you so much. I’ve enjoyed that.

PHILIPPA: If you’re enjoying this series, please do let us know by giving us a rating and a review. It really does help us reach more listeners like you. And if you’ve missed an episode, don’t worry, you can catch up anytime on whichever your favourite app is, or YouTube, or if you’re a PensionBee customer, you can listen in on the PensionBee app too.

And just a final reminder, anything discussed on the podcast shouldn’t be regarded as financial advice or as legal advice, and when investing, your capital is at risk. Thanks for being with us. We’ll see you next time.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.