The Main Changes in the 2025-26 CII R03 Study Text

Here, we take a look at the main changes that you’ll come across in the 2025/26 version of the CII’s R03 study text. As there have been no significant syllabus changes, the majority of the amends stem from the Autumn Statement 2024, the Spring Budget 2025, and the turning of the tax year. This article is particularly relevant to the CII R03, R06, AF1, and AF5 exams

This article is correct as at 26 August 2025 and is relevant to the 2025/26 examinable tax year.

R03, Chapter 1 – Income Tax

There are no changes to the main Income Tax allowances for the 2025/26 tax year. The current freeze on the personal allowance and higher rate threshold will end on 5 April 2028. From 6 April 2028, these will start to rise in line with inflation.

Most company car tax rates will increase from 6 April 2026.

HMRC’s official rate of interest is now reviewed on a quarterly basis, rather than being set for the tax year.

The 2025/26 figures for the married couple’s allowance have been updated. The allowance is now £11,270. This is reduced by £1 for every £2 of income over the threshold of £37,700, to a floor of £4,360.

R03, Chapter 2 – National Insurance contributions (NICs)

The secondary threshold (the point at which employers start to pay NICs) has fallen to £5,000 (from £9,100).

Employers will pay NICs at 15% (up from 13.8%).

The employment allowance (which allows eligible employers to reduce their NI liability) increases to £10,500 (from £5,000), and the £100,000 threshold is removed.

The small profits threshold has increased to £6,845 (up from £6,725). Voluntary class 2 contributions are now £3.50 per week (up from £3.45 per week).

R03, Chapter 3 – Capital Gains Tax (CGT)

The rates for business asset disposal relief and investor’s relief are increasing as follows:

• up from 10% to 14% from 6 April 2025; and
• a further increase to 18% from 6 April 2026.

R03, Chapter 4 – Inheritance Tax (IHT)

Nil rate bands

• The nil rate and residence nil rate bands will now be frozen until 5 April 2030.

Long-term residence

From 6 April 2025, individuals who are long-term UK residents are liable to Inheritance Tax (IHT) on all worldwide assets.

• Long-term residence means UK tax residence in at least 10 of the previous 20 tax years.
• For those aged 20 or under, long-term residence means UK residence in at least 50% of tax years since birth.
• If not long-term resident, IHT only applies to UK-based assets.
• If a UK long-term resident transfers assets to a non-long-term resident spouse or civil partner, the IHT exemption is capped at £325,000.
• The non-resident spouse can elect to be treated as long-term resident for IHT, removing the cap—but this also means their worldwide assets become subject to UK IHT.

Business and agricultural reliefs

• Since 6 April 2025, land managed under certain environmental agreements is eligible for IHT agricultural relief.
• From 6 April 2026, 100% IHT business and 100% IHT agricultural relief will be restricted to the first £1m of combined business and agricultural property. Property in excess of this amount, will be eligible for 50% relief only.
• Where a relevant trust structure was in place prior to 30 October 2024, the £1m allowance applies per trust. For trusts set up on or after this date, the £1m is shared between each trust.
• Assets that would currently be eligible for 50% relief, remain eligible for 50% relief.
• The 100% relief for unlisted shares – e.g. AIM shares – is reduced to 50%.

Pensions

• From 6 April 2027, unused pension funds and pension death benefits will be included in the member’s estate for IHT purposes.

R03 Chapter 5 – Residence and long-term residence

On 6 April 2025, a residence-based regime was introduced, effectively replacing the previous remittance basis regime:

• There is a four-year foreign income and gains (FIG) relief for new arrivals into the UK, providing they have not been a UK resident for tax purposes in the last ten years. During this period, overseas income and gains will be exempt from UK tax, even if they are brought into the UK.
• Anyone who has been a UK resident for tax purposes for more than four years will then start to pay UK tax on their worldwide income and gains. Their domicile status is no longer relevant.

Transitional arrangements for those already eligible for or claiming the remittance basis have been put in place.

As already mentioned, IHT may apply to worldwide assets of long-term UK residents (those resident for at least 10 of the past 20 tax years). UK assets are subject to IHT regardless of an individual’s residence status.

Excluded property trusts are no longer covered in R03.

R03, Chapter 6 – Tax compliance and self assessment

From summer 2025, employees will be able to opt in to pay the High Income Child Benefit Charge through a new HMRC digital service. Once enrolled, the charge will be automatically deducted via their tax code each pay period, spreading the cost and removing the need to file a separate tax return.

R03, Chapter 9 – Direct investments

References to the furnished holiday letting rules have been removed due to this scheme having ended on 5 April 2025.

R03, Chapter 11 – Tax in the financial affairs of individuals and trusts

From 6 April 2027, most inherited pension funds will be subject to IHT unless left to a spouse or civil partner. This ends the current exemption that allows pensions to pass tax-free to children or grandchildren.

This change will shift retirement planning, making it more efficient to use pension funds during retirement rather than preserve them for inheritance. Annuities may become more attractive due to their certainty. Retirees may also consider gifting non-pension assets and drawing income from pensions instead.

While trusts may still offer some protection, they risk both 40% IHT and up to 45% income tax. In some cases, a beneficiary could receive as little as 33% of a pension fund after tax.

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