Tax Year-End Planning Guide – 2025/2026

With the end of the tax year approaching, it’s a good time to organise your finances and make sure you make the most of your tax allowances, reliefs and exemptions.

Some of these allowances will be lost if you don’t use them each tax year, while others will be reduced in the new tax year due to legislative changes.

This guide explains the key areas to plan for before the end of the tax year.

Individual Savings Accounts (ISAs)

  • You can contribute up to £20,000 to your ISA in the current tax year.
  • You need to use this allowance by 5th April 2026, or it will be lost.
  • No tax is payable on any of the income or growth within your ISA, and you can usually withdraw money without penalty. If your ISA is a Flexible ISA, any money withdrawn can usually be replaced in the same tax year without using further allowance.
  • A Cash ISA may be suitable if you expect to need the money within the next five years. Interest rates have fluctuated since 2025 and may continue to change in 2026. Consider easy-access versus fixed accounts based on your goals and needs.
  • A Stocks and Shares ISA might be for you if you are seeking long-term growth and can cope with some potential market volatility. You can switch between Cash and Stocks and Shares later if you wish.
  • Consider a Lifetime ISA (LISA) if you are saving for a first home. Note: Withdrawals for non-qualifying purposes may incur a 25% government charge.

Please note: Your capital is at risk. Past performance is not a reliable indicator of future results. Investments can go down as well as up. Tax treatment depends on individual circumstances and may change.

Pension Contributions

  • Pensions are extremely tax-efficient due to tax relief on your contributions.
  • It is generally wise to opt into any pension scheme provided by your employer.
  • It’s worth making the maximum contribution to your pension, depending on your available allowances and personal budget.
  • In 2025-26, the maximum annual allowance for pension contributions is £60,000 or 100% of your earnings (whatever is lower). This limit includes employer contributions.
  • Check you are reclaiming higher and additional rate tax relief if you pay the 40% or 45% rate, particularly if you are making personal pension contributions.
  • Higher and additional rate taxpayers can also use pension contributions to reduce their effective earnings and bring them into a lower tax band.
  • Consider using any carried forward allowances if available.
  • If you have already taken taxable benefits from your pension, you might have triggered the Money Purchase Annual Allowance. If triggered, the Money Purchase Annual Allowance currently limits contributions to £10,000 per year.
  • Check if your adjusted income will exceed £260,000 in 2025-26 (including employer pension contributions), as this will also reduce your annual allowance.

Please note: Pension investments can go down as well as up. Access is normally at age 55 (rising to 57 in 2028). Tax benefits depend on HMRC rules, which may change. Making retirement decisions without guidance is risky. Seek advice from a financial adviser or Pension Wise before making pension-related decisions.

Income Tax Allowances

For those saving into pensions, a new cap on salary sacrifice will be introduced from April 2029. Only the first £2,000 of salary sacrificed for pension contributions will be exempt from National Insurance; any contributions above this will attract both employee and employer NI. This change is likely to affect employees earning above £40,000 and may result in reduced take-home pay and pension pots for many. Employers may need to review their benefit structures in response.

You have a number of income tax allowances that can help to increase your net household income. If you arrange your income and assets efficiently, there is still time to make the most of these before the end of the tax year. For example:

  • Personal Allowance – you can earn up to £12,570 before paying tax. If you are taking income from a pension or planning a withdrawal from a bond, you can use this allowance to offset tax. Similarly, if you own a business, it’s a good idea to take some of your income as a salary to make use of this allowance.
  • Marriage Allowance – a lower-earning spouse can transfer up to £1,260 of their tax-free personal allowance to their higher-earning partner, potentially reducing the family’s tax bill by up to £252.
  • Dividend Allowance – dividends of up to £500 per year may be drawn (from your own company or from investments) without tax liability.
  • You can transfer assets to your spouse if they pay a lower rate of tax, or to make use of both savings allowances.
  • Tax-free interest – you can earn up to £1,000 from interest without paying tax if you are a basic rate taxpayer. For someone on the higher rate, the Personal Savings Allowance is £500.

Capital Gains Tax Exemptions

  • When you sell investments or property, you might need to pay Capital Gains Tax (CGT) on the profits.
  • You can use your annual exemption to avoid building up large taxable gains. You can realise gains of up to £3,000 without paying tax.
  • If you sell shares to realise a loss, the loss can be carried forward to set against gains in future years.
  • Allocating shares to your spouse or civil partner does not incur tax and means you have double the exemption to set against gains.

Inheritance Tax Planning

  • You can reduce your estate (and potential IHT liability) by making gifts to individuals, charities, or trusts. Charitable gifts are immediately outside your estate.
  • You can gift up to £3,000 per year, and this is immediately set outside your estate. You can also carry forward this allowance by up to one tax year.
  • A couple could potentially gift up to £12,000 by using two tax years’ worth of allowances. Some other exemptions are also available.
  •  If no exemptions apply, most gifts drop out of your estate after seven complete years, so making the gift now starts the clock ticking earlier.

Please note: The Financial Conduct Authority does not regulate will writing, trusts, or estate planning services. Tax laws may change, affecting estate planning strategies. This content is not legal advice. Consult a solicitor or estate planning professional.

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