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Planning for tax year-end 2025-2026

18.03.26

By Ben Hewitt

As the end of the tax year looms, it’s time to make the most of your available allowances. Planning and acting before 5 April helps keep your finances efficient, so you stay one step ahead. Here’s what to consider.

Pensions

Pensions are a tax-efficient way to save for your retirement. That said, pension rules will change from April 2027, and for most people, unused funds will be included in someone’s estate and liable to Inheritance Tax. With this in mind, early planning is essential.

As it stands, most employees benefit from tax relief on pension contributions up to 100% of their taxable earnings. There is also an annual allowance of £60,000, and any pension contributions exceeding this are subject to a tax charge. For high earners, this reduces to between £10,000-£60,000, depending on what you earn (known as the tapered annual allowance). It is worth you getting in touch where your income exceeds £200,000. Don’t forget that you can also carry over any unused annual allowance from the previous three years – but double-check eligibility rules.

If you’re a director of a limited company, you can effectively use pension contributions as a way to reduce Corporation Tax, as long as it meets the rules around legitimate business expenses.

If you’ve already started taking money out of a defined contribution pension, depending on how the benefits are taken, this may trigger the Money Purchase Annual Allowance (MPAA). The MPAA replaces the standard annual allowance of £60,000 with a new allowance of £10,000.

ISAs

You can save up to £20,000 in an ISA every year, tax-free. You can split this amount across multiple ISAs as long as you don’t exceed your £20,000 limit (if you have a Lifetime ISA, the limit is £4,000).

If you haven’t already made the most of your ISA allowances, it’s worth prioritising them as they reset each year and you can’t roll unused allowances over. In simple terms, it’s use it or lose it.

If you want to move your ISA from one provider to another, you’ll need to arrange a transfer rather than withdrawing the money and redepositing it. If you withdraw funds and then put them into a new ISA, you’ll take from your ISA allowance.

You can generally transfer your money between different types of ISAs without penalty, but there are a couple of exceptions. If you have a Lifetime ISA (LISA), you’ll need to transfer this to another LISA to avoid withdrawal fees.

Remember that from April 2027, if you’re under 65, you’ll only be able to save up to £12,000 in a cash ISA. However, you’ll still be able to invest up to £20,000 across multiple ISAs (so you could have £12,000 in a cash ISA and £8,000 in a stocks and shares ISA, for example). If you’re 65 or over, your cash ISA allowance isn’t affected.

Junior ISAs

If you have children, you can also invest up to £9,000 a year in a Junior ISA. To be eligible, your child must be under 18 and live in the UK. Bear in mind that while you’ll be able to manage the account as the ‘registered contact’, the money will belong to your child. Your child can take ownership of their Junior ISA when they turn 16, but they won’t be able to withdraw cash until their 18th birthday.

Should I invest in cash or stocks and shares ISAs?

Historically, holding stocks and shares for long periods (typically five years or more) can yield higher returns than cash savings. However, the value can go down as well as up, which doesn’t happen with Cash ISAs.

Cash ISAs typically remain steady, but low interest rates could mean you see slower growth. Inflation can also decrease the value of your cash (in real terms).

Nevertheless, historic performance is not an accurate gauge of current or future returns, so if you’re not sure where to invest, it’s worth speaking to a financial adviser.

Venture Capital Trust (VCT) schemes

This current tax year is the last chance to enjoy 30% Income Tax relief on investments up to £200,000 in a VCT. From 6 April 2026, that allowance falls to 20%. It’s worth noting that VCTs can only be used to reduce your tax liability to nil, and they can’t be used to carry over losses or trigger rebates.

Investing in a VCT can be beneficial if you’ve used up your ISA and pension allowances. It can also be suitable if your tax liability is high enough to benefit from Income Tax relief. To qualify, your shares will also typically need to be held for at least five years. If you relinquish the shares or the company you invest in doesn’t qualify as a VCT, then HMRC can claim back any tax relief.

However, VCTs are higher risk investments, and they can fall or rise in value more sharply than other types of investment. Therefore, it is important to get financial advice before considering this type of investment.

Capital Gains Tax (CGT)

If you sell or transfer assets, you may be charged Capital Gains Tax (CGT) on the profit you’ve made from it, unless it falls within your allowance, which is currently £3,000.

You can minimise your CGT liability by using sell-and-buyback strategies. Crystallising assets before year-end resets their base cost, reducing the CGT payable. This approach can be applied to ISAs and SIPPs; for example, you could sell an investment and buy it back within a stocks and shares ISA.

Inheritance Tax (IHT) and gifting

New IHT rules around Business Relief and Agricultural Property Relief come into force from April 2026, but maximising gift allowances now can help lower any future tax liability.

If you pass away within seven years of giving the gift, IHT may be due.  However, currently you can give away up to £3,000 each year—this is your annual exemption. Gifts, whether cash or otherwise, may be split among one or more people, but must not exceed this total. Annual exemptions can be carried over for only one tax year.

You can also give as many gifts of up to £250 per person within a tax year as you want. Be mindful that you can’t combine your annual allowance and your small gift allowance for the same person, for example, you can’t give a child £3,250. Small gifts made from your regular income (for example, for birthdays or Christmas) are exempt from IHT.

If you make regular payments to someone else out of your usual income, these can also be exempt from IHT as long as they’re made from surplus money after meeting your own living costs. This could include supporting a relative by paying their rent or contributing to a grandchild’s education.

If you’re gifting as part of IHT planning, be sure to keep detailed records of the gifts you’ve made, including the amounts and dates.

Dividend planning

Dividends over the £500 allowance are taxable at 8.75% (basic), 33.75% (higher rate), and 39.35% (additional rate).

When you review dividend income, you’ll need to consider your salary, pension contributions, and investments, as it may be more tax-efficient to sell investments and crystallise gains up to your CGT allowance, instead of taking dividends.

From April 2026, basic and upper tax rates will increase to 10.75% and 35.75%, respectively. The additional rate will stay the same.

State Pension and National Insurance (NI)

If you’ve got gaps in your NI contributions, now may be the time to make voluntary (class 2 or 3) payments so that you qualify for the full State Pension at retirement. If you’ve worked abroad, it’s even more important to consider making voluntary payments as the rules will change next financial year.

From April 2026, self-employed people won’t be able to make class 2 contributions, and the only option to make voluntary payments will be under class 3, which costs more. If you want to check whether you’re up to date with your NI payments, you can find out at GOV.UK, check your NI record.

If you have children, it’s also a good idea to register for Child Benefit if you haven’t already done so. Even if you plan to opt out of receiving payments, it’s important to register as you’ll receive NI credits which count towards your State Pension. Registration also means your child will automatically receive an NI number when they turn 16, without needing to apply for one.

The value of investments and any income from them can go down as well as up and you might not get back the original amount invested. The past is not a guide to the future. The value of tax benefits depends on your individual circumstances. Tax laws can change.

Financial planning now and for the future

Getting the most out of your tax allowances can be time-consuming, and navigating the complexities can make managing your money overwhelming. The good news is that we can guide you through those complexities, so you can make more of the money you earn.

Using experience, expertise and the latest cashflow modelling fintech, our wealth management experts can help you plan for your financial future now.

Speak to us:  01603 967967
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