ISAs
Individual Savings Accounts (ISAs) remain one of the simplest and most effective ways to save and invest tax efficiently.
The annual ISA allowance for the 2025/26 tax year is £20,000. Any interest, dividends or capital gains you earn within an ISA are tax free, which can make a significant difference over time. You can split your allowance between cash, stocks and shares, and innovative finance ISAs.
If you haven’t used your full allowance yet, you have until 5 April 2026 to do so, but using it earlier in the year can give your savings and investments more time to grow. Remember that unused ISA allowances cannot be carried forward to the next tax year.
It is also important to keep in mind there have been rumours around changes to the allowance. While this is (at the time of writing) unconfirmed, it might be worth making an extra contribution if the Government announces changes – which, depending on the measure, typically only take effect from the new tax year.
Pensions
Pension contributions offer valuable tax benefits and form a key part of long-term financial planning.
You can usually contribute up to 100% of your earnings up to £60,000 (whichever is lower) each tax year and still receive tax relief. Higher and additional rate taxpayers can claim further relief through their self-assessment return or by speaking directly with HMRC.
If your income varies, it may be worth reviewing how much you’ve contributed so far and whether you could increase this before the end of the tax year. It is also possible take advantage of ‘carry forward’ rules, allowing them to use unused pension allowances from the previous three tax years, provided they were a member of a registered scheme during that time.
But it is important to understand the overall picture of your finances before making decisions of this nature. A financial planner can help to ensure the right amounts go to the right places to help ensure your long-term plans are on track.
Gifting
Gifting is a central part of reducing the value of your estate for inheritance tax (IHT) purposes, while helping family members financially.
Under current IHT rules, you can give away up to £3,000 each tax year without it being added to your estate for inheritance tax purposes. If you did not use your allowance last year, you can carry it forward one year, potentially allowing you to gift up to £6,000 this year.
There are also exemptions for small gifts of up to £250 per person and certain gifts made in connection with weddings. Regular gifts made from surplus income can also fall outside your estate, provided they do not reduce your standard of living.
Just remember that keeping an accurate record of your gifts and intentions is important for future reference. Ensuring you have an up to date will is essential while other legal processes such as Lasting Power of Attorney (LPA) is also worth considering.
Personal savings allowance
Depending on your income level, some savings interest outside an ISA may also be tax free.
The personal savings allowance allows basic rate taxpayers to earn up to £1,000 of savings interest tax free each year, while higher rate taxpayers can earn £500. Additional rate taxpayers do not receive this allowance.
If you hold savings across multiple accounts, it can be useful to estimate how much interest you’re likely to earn by the end of the tax year. With interest rates having risen in recent years, it’s easier than before to exceed these thresholds.
Capital gains tax
Capital gains tax (CGT) applies when you sell certain investments, property or other assets for more than you paid, which sit outside of a tax wrapper such as an ISA.
For the 2025/26 tax year, the annual CGT allowance is £3,000 per person. Gains within this amount are tax free, but anything above it may attract tax depending on the type of asset and your income level.
If you’re considering selling investments or assets, planning the timing of sales can help you make the best use of your allowance. A financial planner will be able to help with these decisions.
Couples can transfer assets between them tax free, which can allow each person to use their CGT exemption. Losses can also be offset against gains to reduce the amount of tax due.
Reviewing income
It’s sensible to review your income position as the year progresses. Changes in employment, bonuses, dividend payments or rental income can all affect your tax liabilities.
If your total income pushes you into a higher tax bracket, you might consider ways to manage it, such as making additional pension contributions, or deferring income from assets and keeping certain money in tax shelters such as pensions for longer. Reviewing your position now can help avoid surprises when you complete your tax return.
Tax rules and allowances can be complex, and what works best depends on your personal circumstances, income sources and goals.
Making full use of the available allowances can be a valuable way to consolidate your financial position, but it’s important to ensure any steps you take fit within a broader financial plan.
If you are uncertain about how to make the most of your allowances or whether your current approach is still suitable, it can be helpful to speak with a financial planner.
They can review your individual situation, help you make informed decisions and ensure your strategy remains on track for the rest of the tax year and beyond.
