Tips for a firmer financial footing this tax year

A new tax year is almost upon us, providing an opportune time to review your financial position.

Many of the main allowances, such as ISAs, pensions and Capital Gains Tax (CGT) are well known, but there is no harm in revisiting them to ensure you are making the most of tax-efficient options. Furthermore, inheritance tax (IHT) changes announced by Rachel Reeves in her first budget are likely to see the incidence of gifting increase, and although gifting might seem straightforward, there are numerous aspects to consider.

ISAs

You can invest up to £20,000 in an ISA in any tax year, shielding investment returns from any tax on the interest, dividends, or capital gains. From 6 April 2027, the annual ISA cash limit within the overall annual ISA limit of £20,000 will be reduced to £12,000. This applies only to the under 65s. Despite the change, the ISA remains a highly efficient tax wrapper and an important financial-planning tool.

Pensions

Are you thinking clearly about your future? Currently, you can contribute up to £60,000 towards your pension and benefit from tax relief at your marginal rate each tax year.

CGT

Although capital gains tax took a hit in the 2024 Autumn Budget, the rise in rates was less than some had feared. For basic-rate taxpayers, CGT now stands at 18%, while higher rate (and additional rate) taxpayers face a 24% rate.  While these higher rates are less generous than what they were a few years ago, they are still lower than income tax rates. The annual CGT exemption currently stands at £3,000, significantly lower than the £12,300 allowance just a few years ago. While the allowance has been substantially reduced it can still provide some tax relief.

For those who receive income under what is called ‘Carried Interest’ the rate is 28% but there are very significant changes coming into effect from April 2026 that will see taxation move from the CGT regime to income tax going forward.  Any readers affected should seek specific professional advice.

Tax treatment varies according to individual circumstances and is subject to change. It is important to note that while minimising tax efficiently is the goal, sometimes focusing on paying as little tax as possible is not always the optimal route to take. CGT is by nature a tax on gains and investors should avoid the pitfall of letting the tax tail wag the investment dog.

Estate planning

The continued freeze of the nil-rate band (NRB) and changes to pension IHT treatment will pull more families than ever into the IHT net. The NRB, which has been locked at £325,000 since 2009, will remain frozen until 2030, meaning that more estates will become liable for IHT each year. If this threshold had risen with inflation, it would stand at around the £500k level today, highlighting just how outdated the £325,000 exemption now feels. For many families, this will mean a larger share of wealth lost to tax, making strategic estate planning more critical than ever.

The same is true for family-owned farms and business owners. From April 2026 onwards, only the first £2.5m of qualifying assets per estate will benefit from 100% Agricultural Property Relief (APR). Anything above £2.5m and the relief falls to 50%. Similar changes have been made to Business Property Relief (BPR). Any unused portion of the cap on assets qualifying for 100% relief can be transferred to a spouse or civil partner. This marks a significant change for family-owned farms and businesses.

And finally, in April 2025, the UK shifted to a residence-based IHT system, meaning long-term UK residents now face IHT on their worldwide estates. This change makes it more important than ever to review your estate plan.

Gifting

When gifting, the amount, timing, ordering and frequency can all be important. Gifts can be tax exempt, potentially tax exempt (to individuals and bare trusts) or chargeable lifetime transfers (to relevant property trusts), with potential interactions with other reliefs, allowances and exemptions. This complexity adds to the need for gifting strategies to be thoughtfully advised to optimise their effectiveness.

Around tax year end it is vital to remember the £3,000 annual gifting allowance, worth up to £12,000 per couple/civil partners, where not used in the previous tax year. This offers additional tax efficiency should it be invested in Junior ISAs (JISAs) or pensions for children. These considerations can easily be overlooked at this time of year, with the focus on ISA subscriptions, the pensions annual allowance and capital gains annual exempt amount. Just don’t forget to keep a meticulous record of any gifts made.

How can we help?

At Quilter Cheviot, we help you make the most of your financial opportunities. Here’s how we can support you to ensure this tax year is successful: 

1. Personalised financial planning
   Your financial goals are unique. Our tailored advice ensures you maximise your tax efficient opportunities, so you could keep more of your wealth.
2. Strategic investment advice
   Your financial planner can work closely with investment managers to ensure your investments are diversified to balance risk and return and align with your long-term financial objectives.
3. Regular reviews
   Financial planning is not a one-time event. We offer regular reviews to ensure your plan remains aligned with your goals and adapts to any changes in your circumstances or the tax landscape.
4. Proactive communication
   Our proactive approach can help ensure you’re prepared and aware of potential benefits.

If you have any questions or need personalised advice, don’t hesitate to reach out to your Quilter Cheviot financial planner.

Will writing is not part of the Financial Planning offering.

¹ https://ifamagazine.com/wealthy-brits-are-delaying-major-life-decisions-due-to-the-cost-of-living-crisis/

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Investments and the income from them can go down as well as up, you may not get back what you invest.

This material is not tax, legal or accounting advice and should not be relied on for tax, legal or accounting purposes. Quilter Cheviot does not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting adviser(s) before engaging in any transaction.

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