What to do?
All is not lost. Steps can be taken to ensure more of your money stays in your pocket rather than going to HMRC.
Firstly, many changes announced in the last two years are yet to come into force – there is still time to take action and put in place an effective plan tailored to your specific needs.
Secondly, tax reliefs (at the last count over 1,000!) are available to lower the tax bill, provided these are relevant to your circumstances.
Thirdly, tried and tested estate-planning solutions, including the use of trusts and investment bonds, are available, although once again, subject to your circumstances.
Finally, there are annual tax-free allowances and exemptions. These, however, are time sensitive. For once a new tax year begins, many of the previous year’s tax reliefs disappear – a case of use them or lose them then.
So, with Easter fast approaching and with it the end of the tax year, here are five tax-planning steps that can be taken.
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-taxpayer, 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 an NI saving, can help preserve child benefit and, for those with incomes above £100k, help preserve free childcare and the personal allowance.
Use your ISA allowance
Using your annual Individual Savings Account (ISA) allowance can help shelter any income, growth, or dividends from HMRC.
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.
Save for your children
You can invest in ISAs and pensions for your children. A maximum of £3,600 can be invested 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. And because the money is inaccessible until age 57, your child can benefit from several decades of investment growth.
In addition, each year, you can invest up to £9,000 into a Junior ISA, which provides a tax-free windfall once they reach the age of 18.
Use your capital gains tax (CGT) allowance
For the 2025/26 tax year you can realise £3,000-worth of gains without paying CGT – otherwise known as the annual exempt amount (AEA). By using the AEA every year and shifting the money into an ISA, you can shelter future investment gains from CGT.
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, £3,000 can be gifted without an IHT charge. As any unused allowances can be carried forward 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. The gifts out of normal expenditure exemption is another option.
Even though taxes are going up and personal finances are getting more complex, the tax burden can be eased at the individual level. But action needs to be taken. Making full use of annual reliefs and allowances is a start. The clock is ticking though. Before you know it, Easter will be here.
