Tax-Free Investments: 2026 Guide for UK Businesses

Tax-free investments returned to the spotlight in 2026, and for good reason: the provisional measure that threatened to tax LCI, LCA and debentures at 5% expired in Congress. For those running a digital business who need to make cash work without giving a slice to HMRC, understanding what remains exempt is real money — and this guide shows exactly what changed.

TL;DR

• The Provisional Measure 1.303/2025 tried to end the exemption; it was withdrawn from the agenda in the Chamber (251 to 193) and lost validity in October 2025.
• In 2026, LCI, LCA, CRI, CRA and incentivised debentures remain exempt from Income Tax for individuals.
• Exempt does not mean better: a taxable CDB may yield more net depending on the rate.
• Even if exempt, everything must be declared — code 03 (Assets and Rights) and 12/26 (Exempt Income).
• For digital businesses, idle cash can earn without the tax bite, provided it is allocated to the individual or with the right vehicle.

What are tax-free investments

Tax-free investments are applications whose income is not subject to Income Tax withholding or at redemption — for individuals. In traditional fixed income (Gilts, corporate bonds, funds), HMRC takes a slice ranging from 20% to 45% of the profit depending on your tax bracket. With exempt instruments, that slice is zero.

The logic behind the exemption is public policy: the government forgoes tax to direct private savings to strategic sectors. LCI and LCA finance real estate credit and agribusiness respectively. CRI and CRA are the receivables certificates of those same sectors. Incentivised debentures fund infrastructure works — roads, energy, sanitation.

In practice, what does this mean for your pocket? If a taxable bond pays 5% per year and you are a basic-rate taxpayer (20%), the net return falls to 4%. Meanwhile, an LCA paying 4.5% delivers the full 4.5%. The maths changes who wins. Therefore, comparing exempt with taxable only makes sense by looking at the net yield, never the headline rate.

What changed in 2026: the fall of Provisional Measure 1.303

Here is the news that reignited the topic. In 2025, the government issued Provisional Measure 1.303, part of the package to offset the repeal of the IOF increase. The original text proposed unifying the taxation of financial investments at 18% and, more controversially, creating a 5% Income Tax rate on income from currently exempt securities — LCI, LCA, CRI, CRA and debentures — for papers issued from 1 January 2026.

The market reaction was immediate. During the process, the rapporteur Carlos Zarattini (PT-SP) had already backtracked and maintained the exemption for incentivised debentures, CRI and CRA in the amended version. Still, the measure did not survive: the Chamber of Deputies withdrew the MP from the agenda by 251 votes to 193, and without a vote within the constitutional 120-day period it expired in October 2025.

The result is straightforward: without an approved law, the current rules remain valid for 2026. The regressive rate model continues, and the exemptions for LCI, LCA and incentivised debentures remain intact. A realistic caveat: the issue is not dead. Fiscal pressure for new revenue sources exists, and a new bill on the subject may return. But for the 2026 tax year, those who invested in exempt instruments are protected.

Main tax-free investments in 2026

Not all exempt investments are equal. They differ in guarantee, liquidity and credit risk. This table summarises the essentials for individuals:

Asset	Exempt from Income Tax (Individual)?	FGC Guarantee	Typical Liquidity
LCI	Yes	Yes (up to R$ 250,000)	Lock-in + maturity
LCA	Yes	Yes (up to R$ 250,000)	Lock-in + maturity
CRI	Yes	No	Low (secondary market)
CRA	Yes	No	Low (secondary market)
Incentivised debenture	Yes (income and capital gain)	No	Medium (secondary market)
Savings account	Yes	Yes	Daily

Some quick takeaways from the table:

• LCI and LCA are the darlings of those who want exemption with safety, because they are backed by the Credit Guarantee Fund (FGC) up to R$ 250,000 per CPF and institution. The cost is liquidity: they usually have a minimum lock-in period (now 9 months for most) and you can only withdraw at maturity.
• CRI, CRA and debentures have no FGC. The credit risk is the issuer's. In return, they tend to pay more — and for incentivised debentures, capital gains from early sale on the secondary market are also exempt.
• Savings accounts are exempt and liquid, but yield little. They serve as a parking spot, not a strategy.

Why this matters for digital business owners

Here comes the angle that matters to those following Agathas Web. I'm Cleverson Gouvêa, full stack developer and founder of Agathas in 2008. Running a tech company taught me something that coding courses don't: idle cash is money melting to inflation.

Every healthy digital business builds reserves — the director's salary not yet taken, a project advance, the emergency fund covering three to six months of operations. This money mostly sits in a current account or an automatic investment yielding 100% of the CDI and still paying tax. Swapping part of it for tax-free investments changes the net yield game without materially increasing risk, when you choose FGC-backed papers.

The financial discipline I apply to cash is the same I advocate for software infrastructure: cut hidden costs. It's the same reasoning as when I wrote about the hidden cost of markup in WhatsApp messages — a fee nobody questions silently erodes margins. Income Tax on earnings is exactly that: a silent leak that, over years, eats a large chunk of what your reserve could have earned.

How to declare on your 2026 tax return (even if exempt)

A common mistake: thinking "exempt" means "no need to declare". Wrong. Exemption is about not paying tax, not about hiding the asset from HMRC. Those who omit fall into HMRC's enquiries due to asset inconsistency — the broker reports everything via e-Financeira, and HMRC cross-checks.

The correct path for the 2026 tax return has two places:

1. Assets and Rights section — report the invested balance under code 03 – Exempt securities (LCI, LCA, CRI, CRA, LIG, Infrastructure Debentures and others). Here goes the asset: how much you held on 31/12.
2. Exempt and Non-Taxable Income section — report the interest and indexation received during the year. Code 12 covers LCI and LCA; code 26 is for income from incentivised infrastructure debentures.

The golden rule is to separate asset from income. The invested balance goes in Assets and Rights; what it earned goes in Exempt Income. Mixing the two is the source of many HMRC enquiries. The income statement the institution sends by February brings these values ready — just transcribe them into the correct fields.

Company cash reserve: where to allocate

A frequent trap for entrepreneurs: applying company cash expecting individual exemption. It doesn't work that way. The exemption for LCI, LCA and incentivised debentures is a benefit for individuals. For legal entities, most of these earnings are subject to Corporation Tax according to the company's tax regime.

In practice, this opens three legitimate paths:

• Director's personal reserve: the salary and dividends already paid out to the individual can go into exempt instruments and fully benefit from the exemption.
• Company cash: here the conversation is with your accountant. Funds and investments have their own treatment, and the choice depends on the regime (Small Business, Presumed, Actual).
• Operational emergency reserve: money that might be needed at any moment does not mix with a 9-month lock-in. For this portion, daily liquidity is worth more than tax savings.

The principle I use for cash is the same I apply when deciding system architecture: size for real use, not theoretical. It was this logic I described when showing why paying per employee on WhatsApp failed as a model — the cost must fit the usage, not the other way around. Only lock in exempt what you won't need before maturity.

Exempt does not mean better

Bank marketing sells "exempt" as if it were always superior. It isn't. The right question is never "does it have tax or not?", but "how much do I keep in my hand?".

A concrete example. Compare a taxable bond paying 5% with an LCA paying 4.2%, both for two years. For a basic-rate taxpayer (20%), the net on the bond is 4%. The LCA's 4.2% exempt beats it. But for a higher-rate taxpayer (40%), the bond nets 3%, and the LCA's 4.2% wins even more. The exempt figure looks smaller, but the final result is what matters.

The rule of thumb for comparison: take the exempt rate and divide by (1 minus the tax rate of the taxable) to find the equivalent taxable rate. If the taxable you have on offer pays more than this equivalent, it wins — even after tax. Never decide by the label; decide by net yield over your horizon.

Common pitfalls to avoid

Those investing in exempt instruments almost always trip on the same points:

• Ignoring the lock-in. LCI/LCA tie up money. Putting your emergency fund there is a recipe for trouble when an unexpected expense arises.
• Forgetting the FGC limit. The guarantee is R$ 250,000 per CPF and per institution, with a global cap of R$ 1 million renewable every 4 years. Concentrating more than that in one bank is taking risk for free.
• Confusing exemption with absence of risk. CRI, CRA and debentures have no FGC. Exempt from tax does not mean exempt from default.
• Not declaring. We've said it — but repetition doesn't hurt. HMRC enquiries for omission of exempt income are among the most common.
• Buying by the headline rate. Always calculate the equivalent net before deciding.

Conclusion: protect the yield, not just the revenue

The message for 2026 is good for the investor: tax-free investments resisted the taxation attempt, and LCI, LCA, CRI, CRA and incentivised debentures continue to deliver full yield to individuals. But exemption alone is not a strategy — it's a tool. It shines when placed in the right portion of your cash, with the right horizon, and after the net yield calculation.

At Agathas Web, the philosophy is the same inside and outside the code: eliminate leaks where nobody is looking. If you run a digital business, look at idle cash with the same rigour you look at your cloud bill. The next practical step is simple — separate today the director's personal reserve from the operational reserve, and move to exempt only what can stay locked. And at the end of February, keep the income statement: it's the map for your tax return.

This content is for informational purposes and does not constitute investment advice. Consult your accountant and an adviser for specific decisions.