End of Tax Year Planning
Written by Mark Salter
The end of the 2025/26 tax year is fast approaching and with more tax payable by most of us over the next few years, it’s even more important to take full advantage of your tax free allowances and exemptions.
The list below will help you take advantage of some of these and remember they must be used on or before the 5th April 2025 which falls over the Easter weekend this year.
ISA Allowance
The annual ISA allowance is £20,000 per person (£40,000 for a couple!). There’s still no difference in limits between a stocks and shares ISA and a cash ISA, so for now you can continue to save the entire £20,000 in a cash ISA or invest it in a stocks and shares ISA. Alternatively you can have a mixture of the two providing you don’t exceed the £20,000 limit.
The benefit of ISAs is that you don’t pay income tax on the interest or dividend and they are not subject to capital gains tax.
For investors under the age of 60 the ISA limits will be changing from 6th April 2027, with limits on Cash ISAs reducing to £12,000 but stocks and shares ISAs will remain at £20,000 for all.
Lifetime ISA (LISA)
These ISAs help younger people save to buy their first house or if they don’t use it to buy a house, it can be used for retirement. You have to be between 18 and 40 to open a LISA and you have the option of a cash LISA or a stocks and shares LISA. The maximum you can invest is £4,000 which receives a government bonus of 25% (up to £1,000). Any contribution to a LISA forms part of your £20,000 ISA allowance.
Junior ISAs
Just like ordinary ISAs, there are Junior Individual Savings Accounts known as JISAs. They can be opened for children under 18 who don’t have a Child Trust Fund account. The child can take control of the JISAs from the age of 16, but cannot withdraw from them until they are 18. The annual tax free JISA allowance is £9,000 per child.
Pension Allowance
In the 2025/26 tax year you are able to place up to £60,000 into a pension (subject to UK relevant earnings). Any past years’ pension allowance which had not been used up can be carried forward, but only for the last three tax years. Using your pension allowance can significantly reduce the earnings you get taxed on, possibly bringing your earnings for tax purposes down into another tax bracket.
Some employers provide the option of salary sacrifice which as well as saving income tax on earnings can also have the added benefit of saving the amount of National Insurance you pay. This highly effective way of reducing tax will only be available until April 2029, so it may be worth investigating for some, before it’s restricted to just £2,000 per annum.
Please bear in mind that individuals with high earnings (adjusted income above £260,000) need to take care as the annual allowance is reduced by £1 for every £2 above this limit and professional advice is essential.
Income Tax
For those individuals whose earnings are in and around the tax band thresholds, some last minute planning may be tax efficient. Up until 5th April you can earn up to £50,270 without going into the 40% tax band (personal tax free allowance of £12,570 + £37,700). If your income exceeds £50,270 then additional pension contributions may be worth considering as higher rate tax relief may be available.
Investors will be paying more tax on investment and savings income over the next couple of years as the tax rates on dividends will increase by 2% from April 2026 and tax on savings income will be increasing by 2% from April 2027.
Capital gains Tax
The annual CGT exemption is £3,000 for 2025/26 tax year. If you have unrealised gains, you may decide to dispose of some before the end of the tax year to use up your annual exemption. As far as possible it is important to use the annual exemption each tax year because, if unused, it cannot be carried forward.
At Fort Financial Planning, we have The Tax Reduction StrategyTM which is an important part of our Comprehensive Financial Planning service. A pound of tax saved is, after all, an extra pound in your pocket.