We might’ve just ended the 2024/25 period, but proactive planning can help you make the most of tax allowances, protect your money and align your finances with your long-term goals.
Here’s a practical guide to what to consider as the 2025/26 tax year begins.
1. Plan to maximise your ISA allowance
Individual Savings Accounts (ISAs) remain one of the most tax-efficient ways to grow your wealth in the UK. For the 2025/26 tax year, the annual ISA allowance is unchanged at £20,000. The ISA allowance is a ‘use it or lose it’ opportunity - unused allowance don’t roll over. Anyone under the age of 40 who is saving for a home deposit, or for retirement, should think about using some of their allowances on a Lifetime ISA (LISA). Which offers Government top-ups of up to 25%. This means if you use your full £4,000 allowance the government will top this up by £1,000 a year.
For families, don’t overlook the Junior ISA (£9,000 allowance per child) to kickstart your kids’ financial future. There are potential changes coming to ISAs, confirmed by the Government in the recent Spring Statement, which makes using allowances while you’ve got them and utilising a financial planner’s expertise to understand these changes even more important. By thinking now of what you can contribute, you’ll have a whole year to ensure you’re maximising your allowance.
2. Review your pension contributions
Pensions offer generous tax relief, making them a cornerstone of retirement planning. The annual pension allowance is currently £60,000 (or 100% of your earnings, if lower), though this could be less if you’re a high earner subject to the tapered allowance or if you’ve already started drawing a pension.
Contributions attract tax relief at your marginal rate - 20%, 40%, or 45% - reducing your tax bill while boosting your retirement pot. Check with a financial planner whether you can ‘carry forward’ unused allowances from the past three tax years - a little-known rule that could allow you to contribute significantly more if you’ve got spare cash.
With potential changes to pensions often debated in Westminster, locking in benefits now could be wise.
3. Use your Capital Gains Tax allowance
The Capital Gains Tax (CGT) allowance lets you realise £3,000 in gains tax-free each year.
If you’ve got investments outside an ISA, consider selling and repurchasing assets (known as ‘bed and ISA’) to maximise gains within this limit, then shelter them in an ISA going forward. This can ensure you don’t miss out on available annual allowance even if you have no need to sell, while limiting potential future CGT liabilities. Couples can double up, as each partner gets their own £3,000 allowance. Your planner can help identify which assets to offload and ensure you stay within the rules.
4. Check your Income Tax position
The tax year reset is a chance to review your income streams and tax bands.
Frozen income tax thresholds — often called ‘fiscal drag’ — mean that even though tax bands haven’t changed, many people are ending up in higher tax brackets. As wages and pensions rise with inflation, more of your income can cross those fixed thresholds, increasing the amount of tax you pay. In effect, you’re not earning more in real terms, but you may still face a bigger tax bill. This can quietly erode your take-home income over time, which is why regular financial reviews are so important. If you’re near a threshold - say, £100,000, where the personal allowance starts tapering - small adjustments such as pension contributions could keep you out of the 60% ‘tax trap’ zone.
This is especially relevant for families with young children where one earner tipping over the £100,000 earnings threshold could cause the loss of thousands of pounds in child benefits and free childcare provisions.
Self-employed? Ensure your records are up to date and consider making payments on account before the 31 July deadline.
A financial planner can model your tax liability and suggest ways to optimise your take-home pay.
5. Protect your wealth with gifting
Inheritance Tax (IHT) remains a concern for many UK families, with a 40% rate on estates over £325,000 (or £500,000 with the residence nil-rate band).
The start of the tax year is a perfect time to use your £3,000 annual gift exemption - plus any unused amount from 2024/25. You can also make unlimited £250 ‘small gifts’ per recipient or give from surplus income without IHT implications, provided it's regular and documented.
For larger gifts, the seven-year clock starts ticking as soon as you give, so early planning is key.
Discuss with your financial planner how to balance gifting with your own financial security.
6. Reassess your goals and risk appetite
Life changes - marriage, kids, a new job - can shift your financial priorities. Use April as a checkpoint to review your goals with your planner.
Are you saving enough for that dream home? Is your investment risk level still appropriate? Higher interest rates or market volatility might mean tweaking your strategy.
A fresh tax year is also a good moment to update your emergency fund, if you can, aim for three to six months’ expenses in an easy-access account.
7. Stay ahead of tax changes
The UK Government often announces tax tweaks in the Autumn Budget, which could affect allowances or rates from 6 April.
Keep an eye on updates but don’t panic or make rash decisions. Your planner can help you adapt to any situation.
The start of the tax year isn’t just a date - it’s an opportunity. By acting early, you can lock in tax benefits, protect your wealth, and set a clear financial course for the year ahead.
If you’ve got a planner, book a meeting now to tailor these steps to your circumstances. If you’re going it alone, take time to crunch the numbers and seek professional input where needed.
