Five things to do before the end of the tax year

5 minute read

With the end of the tax year in sight, making the most of your annual tax-free allowances and exemptions should be racing up your list of priorities.

Every year, many individuals and businesses end up paying more tax than necessary. This does not have to be the case.

Once a new tax year begins, many of the previous year’s tax reliefs disappear; you either use them or you lose them. But do not panic – there is still time in the current tax year to claim your tax-free allowances.

By taking five sensible tax-planning steps between now and 4 April 2026, you can put more money in your pocket and less in HMRC’s.

1. Make pension contributions

Putting money into a pension has significant tax advantages. You can receive income tax relief at your marginal rate on pensions contributions, capped at £60,000 or your relevant UK earnings, if lower. You receive 20% tax relief from the government in tax relief and if you are a higher rate or additional-rate-tax payer, you can claim a further 20% or 25%, respectively, via your tax return on personal contributions. In some cases, the effective rate of tax saved can be even higher.

Pensions did not escape Budget 2025 unscathed. From 6 April 2029, only the first £2,000 of pension contributions through salary sacrifice each year will benefit from National Insurance (NI) savings. Contributions through salary sacrifice will still benefit from income tax relief at one’s highest marginal rate of tax. And a reduction in salary, irrespective of whether there is a NI saving can help preserve child benefit and, for those with incomes above £100k, help preserve free childcare and the personal allowance.

2. Use your ISA allowance

Using your annual Individual Savings Account (ISA) allowance can make a real difference to your financial future. The tax-free structure of an ISA means any income, growth or dividends are sheltered from HMRC.

Your maximum allowance for the current tax year is £20,000. You have a wide range of investment options to choose from. While cash, and stocks and shares are the most well-known, there are other versions available.

In addition, for those of you looking to save towards you first home and/or retirement, you can pay up to £4,000 into a Lifetime ISA and receive a government bonus of 25%, although this £4,000 does count towards your £20,000 annual ISA limit.

Like pensions, ISAs were targeted in the 2025 Budget. From 6 April 2027, the annual ISA cash limit —within the overall annual ISA limit of £20,000 — will be reduced to £12,000 for those under 65. Despite the change, the ISA remains a highly efficient tax-wrapper and an important financial-planning tool, particularly as Budget 2025 also saw a 2% increase in savings income and dividend income tax. So, while the ordinary tax rate on dividend income will rise to 10.75% from 8.75% and the upper rate to 35.75% from 33.75% (the additional rate is unchanged at 39.35%) from 6 April 2026 onwards, dividends will continue to be tax free if generated through a stocks and shares ISA.

3. Save for your children

In the same way you can invest in ISAs and pensions for yourself, you can also pay into them for your children.

While putting money aside for a child’s retirement may seem premature, there are advantages to starting early. Because the money is inaccessible until age 57, your child can benefit from several decades of investment growth.

You can invest a maximum of £3,600 into a pension for each child, with payments receiving the 20% government tax relief outlined above. This means that a £3,600 contribution would cost you £2,880.

You may, however, wish to financially support your children before they reach retirement, such as helping to fund university fees, buy a car, or put down a deposit on their first home. Each year, you can invest up to £9,000 into a Junior ISA, which provides a tax-free windfall at age 18 for your child or grandchild to spend how they please.

4. Use your capital gains tax (CGT) allowance

Unlike ISAs and pensions, with many other investments you pay tax on any growth and income. That said, there are still ways to help soften the blow on current and future tax bills.

For the 2025/26 tax year you can sell, transfer or gift £3,000 worth of assets without paying CGT – otherwise known as the annual exempt amount (AEA). The AEA is particularly useful to anyone with large share portfolios. By using it every year and shifting the money into a tax haven, for example an ISA, you can shelter future investment gains from CGT.

5. Use your annual inheritance tax (IHT) allowances

IHT is described as the ‘voluntary tax’ for good reason. By taking steps early and frequently, you can mitigate IHT or even avoid it completely.

Every tax year you can gift £3,000 without a IHT charge. As you can carry forward any unused allowances from the previous tax year, a married couple could gift as much as £12,000 before 6 April. You can also give £250 to as many people as you like.

Gifts out of normal expenditure exemption is a further useful string to your bow as it means any payments into a child’s pension or ISA will not give rise to an IHT charge.

The value of investments and pensions and the income they produce can fall as well as rise. You may get back less than you invested.

Tax treatment varies according to individual circumstances and is subject to change.

Investors do not pay any personal tax on income or gains, but ISAs may pay unrecoverable tax on income from stocks and shares received by the ISA managers.

Inheritance Tax Planning is not regulated by the Financial Conduct Authority.