Year-End Tax Planning 2025–26

 

Start by reviewing your total income for the year and ensuring that your Personal Allowance of £12,570 has been fully utilised. Income may include salary, bonuses, freelance work, rental income, dividends and interest from savings. 

 

Understanding your overall taxable income will help determine whether you are approaching a higher tax band. For example, higher rate tax begins at £50,271, and additional rate tax applies to income above £125,140. 

 

If your income is close to these thresholds, it may be worth considering whether pension contributions or charitable donations could help reduce your taxable income and keep you within a lower tax band. 

 

 

Where relevant, consider making use of the dividend allowance, which currently allows up to £500 of dividend income to be received tax-free in the tax year. 

 

 

Individual Savings Accounts (ISAs) remain one of the most tax-efficient ways to save or invest in the UK. 

 

For the 2025–26 tax year, individuals can invest up to £20,000, and any interest, dividends or capital gains generated within the ISA are free from UK tax. 

 

Unused ISA allowances cannot be carried forward to the following tax year. If you have not yet used your full allowance, contributing before 5 April ensures that the opportunity is not lost. 

 

 

Pension contributions can also provide significant tax advantages. Contributions generally receive tax relief at your marginal rate, effectively increasing the value of your retirement savings. 

 

Higher-rate and additional-rate taxpayers may benefit particularly from making additional contributions before the end of the tax year. 

 

The annual pension allowance is currently £60,000 or 100% of your earnings, whichever is lower. Contributions above this amount may trigger an Annual Allowance Charge, unless you are able to use unused allowances from the previous three tax years under the carry forward rules. 

 

 

If you hold investments or assets that have increased in value, it may be worth reviewing potential gains before the end of the tax year. 

Individuals currently have a Capital Gains Tax (CGT) annual exempt amount of £3,000. Realising gains up to this level before 5 April can help reduce future tax liabilities. 

 

In some cases, investors may choose to reinvest the proceeds into tax-efficient accounts such as ISAs. 

Organise Your Financial Records 

Finally, ensure that your financial records are complete and well organised. This may include: 

 

• payslips 

 

• bank statements 

 

• dividend vouchers 

 

• investment summaries 

 

• receipts for allowable expenses 

 

Good record-keeping will make it easier to prepare a Self Assessment tax return, where required, and helps reduce the risk of errors or missed reliefs. 

 

Preparing for the end of the tax year is not simply a compliance exercise. It is also an opportunity to review your financial position and plan ahead. By making use of available allowances and keeping financial information organised, you can enter the new tax year in a stronger position. 

 

 

 

There is a well-known saying in finance: “Cash is king.” Maintaining accessible cash ensures you can meet unexpected expenses, cover short-term obligations, and avoid relying on borrowing. Building or topping up an emergency fund provides financial stability and peace of mind, making it easier to respond to opportunities or challenges in the year ahead. 

 

 

It remains important to review pension contributions and ensure available allowances are used efficiently where possible. 

There are also some future policy developments to be aware of: 

 

• From 6 April 2027, unused pension funds and certain death benefits are expected to fall within the inheritance tax (IHT) regime, which may affect estate planning. 

 

• Following the Autumn Budget 2025, changes have also been announced to salary sacrifice pension arrangements. From April 2029, the National Insurance exemption for employee pension contributions via salary sacrifice will apply only to the first £2,000 of contributions. Contributions above this level will become subject to National Insurance. 

 

The exemption for employer contributions and other salary sacrifice benefits is expected to remain unchanged. 

 

Gift Aid allows charities to reclaim basic rate tax on donations made by UK taxpayers. 

 

By ticking the Gift Aid declaration, you confirm that you are a UK taxpayer and have paid enough tax during the year to cover the amount reclaimed by the charity. 

 

Gift Aid can apply to donations, sponsorship payments and certain charity membership subscriptions. 

For households where one individual pays tax at a higher rate, it can sometimes be beneficial for that person to make the Gift Aid donation. Higher-rate taxpayers may be able to claim additional tax relief through their Self Assessment tax return. 

 

 

For the 2025–26 tax year: 

 

• Individuals aged 18 or over can contribute up to £20,000 per year to ISAs. 

 

• A Junior ISA allows contributions of up to £9,000 per child each year. 

 

• A Lifetime ISA (LISA) can be used to save for a first home or retirement. 

 

With a Lifetime ISA, individuals can contribute up to £4,000 per year, and the government adds a 25% bonus. Contributions can be made until age 50, and the account must be opened before age 40. 

 

The £4,000 LISA contribution forms part of the overall £20,000 annual ISA limit. 

 

 

The Chancellor has indicated that the Cash ISA subscription limit may reduce to £12,000 from April 2027, with the intention of encouraging more long-term investment into stocks and shares. 

 

The overall ISA annual allowance is expected to remain £20,000, meaning savers will still be able to spread contributions across different types of ISAs within this limit. 

 

Existing savings already held in Cash ISAs will not be affected by this change. Further guidance on transitional rules is expected following industry consultation. 

 

 

At Chart Accountancy, we can help you review your financial position, identify potential tax planning opportunities and ensure you are making the most of available allowances. With the right planning in place, you can approach the new tax year with greater confidence.