End of Year Tax Planning
Key UK tax allowances and reliefs for the 2025/26 Tax Year (ending 5 April 2026):
You should review your personal and investment situation before the April 2026 deadline to ensure you have made the most of any available allowances and reliefs.
Here is a summary of the key allowances and reliefs to consider before the tax year closes:
ISAs
Returns from an ISA are tax-free and in the current tax year, individuals can invest up to £20,000 in either a Cash, Stocks & Shares or an Innovative Finance ISA, or a mixture of each.
As part of your main allowance, a Lifetime ISA (LISA) is available to anyone between 18 and 40 saving up to £4,000 towards a first home or retirement until age 50. Contributions to a LISA attract a 25% Government addition, but penalties can apply where the funds are not used for a qualifying purpose.
You can invest up to £9,000 in a Junior ISA for anyone under 18 living in the UK. From April 2027 the limit is to be reduced to a maximum of £12,000 for Cash ISA’s for the under 65’s.
Remember ISA allowances cannot be carried forward past 5 April, so use it or lose it!
Pensions
Most people obtain Income Tax relief on pension contributions up to the annual allowance. For 2024/25 you can generally contribute £60,000 gross or 100% of your earnings or £3,600 (whichever is lower). As well as receiving a 20% top-up from the Government on any net personal contributions you make. You may also be able to reduce the amount of income tax you pay by extending your basic rate band and/or reinstating your personal allowance and you may be able to reduce the claw back Child Benefit payments.
Please note that from April 2027 most unused pension funds will form part of your Inheritance Tax (IHT) estate.
Business owners can extract profits as a pension contribution, saving on income tax and National Insurance liabilities. Changes to Salary Sacrifice arrangements will come into place from April 2029.
Any unused pension annual allowance from the past three years can be carried forward.
Use Your Annual Tax Allowances
From 6 April 2024 the Capital Gains Tax (CGT) allowance was reduced to £3,000. This figure will remain the same from April 2025.
Following the Autumn Budget 2024, the rates of Capital Gains Tax were increased to 18% and 24% for disposals made on or after 30 October 2024. Remember that assets can still be transferred between married or civil partners who live together ‘tax free’, and it can be sensible to maximise the use of each partner’s individual allowance (subject to any transactional and legal costs that may be incurred).
The Marriage Allowance allows a basic rate taxpayer to transfer £1,260 of their spouse’s personal allowance to themselves, provided the spouse earns less than £12,570. This allowance potentially reduces your tax bill by up to £252 if you are a basic rate taxpayer.
If you are registered blind or severely sight impaired, or you have a certificate that says you are blind or severely sight impaired (or a similar document from your doctor) you may be able to claim Blind Persons Allowance of £3,130. This is a tax free allowance which is added to your personal allowance.
If you run your own business through a limited company, the first £500 of dividends that you draw are tax free, irrespective of other income. This allowance remains at £500 for the 2025/26 tax year.
The personal savings allowance is £1,000 of tax-free interest for basic rate taxpayers, and £500 for higher rate taxpayers. There is no allowance for those paying tax at 45%.
Two further £1,000 tax-free allowances are available: one for property and the other for miscellaneous trading income. If the actual allowable expenses incurred exceed £1,000, these may be claimed instead.
Inheritance Tax (IHT)
An individual can make gifts of up to £3,000 annually (per donor, not per recipient). If last year’s (2024/25) allowance has not been used, that allowance is still available.
In addition, multiple smaller annual gifts of £250 to any number of people is exempt. However, a gift of £251 would be taken into account for the seven year rule.
Regular gifts out of their income can also qualify for an exemption from Inheritance Tax. This requires a gift made from excess income where the donor retains sufficient income to maintain their lifestyle.
You can also make one-off gifts on marriage or civil partnership; the amount exempt depends on your relationship to the couple. Larger gifts over and above these exemptions can also be made, but these would typically be treated as a potentially exempt transfer (PET) which becomes fully exempt seven years after the date that the gift was made.
The Autumn Budget 2024 also amended how much relief is available for business or agricultural assets. Most of these rules come into effect from 5 April 2026 where 100% relief will be capped at £1,000,000, with only 50% relief applying thereafter. These changes may greatly impact the amount of Inheritance Tax that may be payable on your estate. Therefore, it is important to discuss succession planning as soon as possible as it may be beneficial to make transfers prior to 5 April 2026.
Gift Aid Donations
If you are a UK taxpayer and make a charitable donation via Gift Aid, the charity can claim an extra 25p for every £1 you give. As Gift Aid assumes that the money has been taxed at the standard rate, higher or additional rate taxpayers are eligible to receive a further 20% or 25% (22%, 25% or 28% if you are a Scottish resident) of the grossed-up donation as a reduction in tax liability. So, remember to record any Gift Aid donations on your tax return.
Other Tax Efficient Investments
There are other investment options that are time limited and have tax incentives such as Enterprise Investment Schemes (EIS), Venture Capital Trusts (VCT) and Seed Enterprise Investment Schemes (SEIS).
With the 5 April 2025 deadline in mind, we would advise everyone to consider all the tax-saving and investment opportunities available to them. With growing pressure on the Government to increase tax revenues to combat ongoing economic challenges, there is a great deal of uncertainty around how wealth will be taxed in the future. This year more than ever it is a case of act now and use it or lose it!
You can find more details in our recent Autumn Budget review on our website – Autumn Budget 2025 – Review.
Please be aware that your capital will be at risk when you invest, and that you may get back less than you invested. There is no guarantee of how future wealth will be taxed and everyone’s situation is unique.
This article does not constitute tax advice or financial advice and therefore no responsibility or liability is accepted by Greaves West & Ayre, its partners or staff for any loss or damage however arising as a result of persons acting, or failing to act, upon the information contained in this article.
