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.

Did You Know?

Some high net worth individuals are delaying key life decisions due to the financial pressures they face, such as putting off starting a business (20 per cent) or their retirement plans (11 per cent).¹

ISAs

You can invest up to £20,000 in an ISA for the 2025/26 tax year, shielding investment returns from any tax on the interest, dividends, or capital gains. While other allowances have been reduced in recent years, making them less generous, ISAs have avoided any change despite speculation that they could be targeted.

Pensions

Are you thinking clearly about your future? For the 2025/26 tax year, you can contribute up to £60,000 towards your pension and benefit from tax relief at your marginal rate. And if you’re 50 or older, don’t forget the catch-up contribution limit of £1,000.  

CGT

Although capital gains tax took a hit in the Autumn Budget, the rise in rates was less than some had feared. For the 2025/26 tax year, the annual CGT exemption is £3,000, the second year at this rate and 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 basic-rate taxpayers, CGT has jumped from 10% to 18%, while higher rate taxpayers now face a 24% rate (28% for carried interest), up from 20%. While these higher rates are less generous, they are still lower than income tax rates.

It is important to note that while efficiently minimising tax is the goal, this does not mean paying as little tax as possible is always optimal. CGT is by nature a tax on gains and investors should avoid the pitfall of letting the tax tail wag the investment dog.

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

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 £503,879, 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.

Beyond this, the new cap on Agricultural Property Relief (APR) and Business Property Relief (BPR) at £1m per estate from April 2026 marks a significant change for family-owned farms and businesses.

From April 2025, the UK will shift to a residence-based IHT system, meaning long term UK residents will 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 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.

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 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 ensures you’re always prepared and never miss out on 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 and is offered in our own right. Financial Planning accept no responsibility for this aspect of our business.

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