Your checklist for the tax year ahead

Think of the new tax year as a clean slate for your tax allowances. Many operate on a ‘use it or lose it’ basis within the tax year (which runs from 6 April 2025 to 5 April 2026). Planning early allows you to take full advantage of these opportunities rather than rushing as the next deadline approaches.

As your financial advisers, we're here to help you navigate these complexities. To get you started, below is a checklist of key areas to consider discussing with us in light of the new 2025/26 tax year.

Your new tax year financial checklist

1. Review your ISA allowances:

   Overview: The overall limit remains £20,000, covering Cash ISAs, Stocks & Shares ISAs, and Innovative Finance ISAs combined. Each type carries different risk characteristics. Cash ISAs are deposit-based, whereas Stocks & Shares and Innovative Finance ISAs involve investment or lending risk, meaning the value of your savings could fall. Specific rules and restrictions apply to Lifetime ISAs.
   Action: You have a fresh ISA allowance for 2025/26 (the overall limit has been £20,000 for several years, covering Cash ISAs, Stocks & Shares ISAs, and Innovative Finance ISAs combined, with specific rules for Lifetime ISAs). Lifetime ISAs allow up to £4,000 per year to be saved and attract a 25% government bonus, but withdrawals for any purpose other than a first home purchase or retirement from age 60 are subject to a 25% withdrawal charge, which can result in receiving back less than you paid in. The Lifetime ISA is not suitable for everyone and whether it is appropriate for your circumstances is something we should discuss. 
   
   Consider making contributions early to maximise potential tax-free growth throughout the year. We can discuss the most suitable type of ISA for your goals, find out more about our insight How to make the most of your ISA allowance. It is also worth noting that from April 2027, new rules will reduce the annual subscription limit for Cash ISAs to £12,000, within the overall £20,000 annual ISA limit (savers aged 65 and over will continue to be able to subscribe up to £20,000 into a Cash ISA each year). This change affects new contributions only,  existing Cash ISA balances are unaffected. If you rely on Cash ISAs for your annual savings, now is a good time to review how your ISA allowance is structured before that change takes effect.

2. Maximise pension contributions:

   Overview: Pension contributions benefit from tax relief, making them one of the most effective ways to save for retirement. There's an Annual Allowance limiting how much you, or others on your behalf, can contribute tax-efficiently each year. Personal tax-relievable contributions are capped at 100% of earnings irrespective of the amount of annual allowance/carry forward available.
   Action: Review your current pension contributions. Can you afford to increase them to make the most of the tax relief available? Remember, unused allowances from the previous three tax years might be carried forward ('Carry Forward'), potentially allowing for larger contributions, subject to eligibility rules. Let's assess your Annual Allowance and any Carry Forward potential.

Please note that if you have already started drawing flexibly from a pension, for example, from a drawdown fund, the amount you can contribute to money purchase pensions with full tax relief may be significantly lower than the standard Annual Allowance. This is known as the Money Purchase Annual Allowance. Do discuss your position with us before increasing contributions.

1. Utilise your Capital Gains Tax (CGT) Annual Exempt Amount (AEA):

   Overview: If you sell assets (like shares, funds outside an ISA, or second properties) that have increased in value, the profit may be subject to CGT. However, you have an annual exempt amount, meaning you only pay tax on gains above this threshold.
   Action: The AEA for 2025/26 is now available. If you're planning to sell assets, structuring sales potentially over multiple tax years can help utilise the AEA effectively. We can review your investment portfolio to see if realising gains within the current year's AEA aligns with your investment strategy. Note: The AEA threshold for 2025/26 is £3,000.

2. Assess the Dividend Allowance:

   Overview: You may receive a certain amount of dividend income each tax year tax-free via the Dividend Allowance. Dividends received above this allowance are taxed at specific rates depending on your income tax band.
   Action: The Dividend Allowance for 2025/26 is £500. Consider how your investments are structured (e.g., holding dividend-paying shares within an ISA or pension wrapper shields them from dividend tax). Let's review your expected dividend income and ensure your portfolio is structured tax-efficiently.

3. Plan your Inheritance Tax (IHT) gifting:

   Overview: Certain gifts you make during your lifetime can be exempt from IHT, provided you survive for seven years after making them (Potentially Exempt Transfers). Additionally, everyone has an 'Annual Exemption' allowing them to give away a certain amount each tax year (£3,000 in this and recent tax years) without IHT implications, regardless of survival. There's also a 'Small Gifts Exemption' (£250 per person), wedding gifts and the very topical regular gifts from surplus income.
   Estate planning considerations have become increasingly significant in recent years. From April 2027, most unused pension funds and pension death benefits will be brought within the scope of IHT for the first time, which may have meaningful implications for those who had planned to pass on their pension wealth to future generations. Separately, changes to Business Property Relief and Agricultural Property Relief took effect from April 2026, introducing a £2.5 million threshold above which the relief is reduced from 100% to 50%. If any of these areas are relevant to your circumstances, now is an important time to review your estate plan.
   Action: Using your IHT allowances early in the tax year is often a sensible part of estate planning. If you plan to make gifts, doing so now starts the seven-year clock ticking sooner for larger gifts and uses your 2025/26 annual exemption. We can discuss how gifting fits into your overall estate plan.

4. Check eligibility for other allowances:

   Marriage Allowance: Allows a spouse or civil partner who doesn't pay income tax (or pays tax at the basic rate) to transfer a portion of their unused Personal Allowance to their higher-earning partner (provided the recipient doesn't pay tax above the basic rate).
   Personal Savings Allowance: Allows non-taxpayers and basic rate taxpayers to earn some savings interest tax-free each year (higher rate taxpayers get a smaller allowance, additional rate taxpayers get none).

Your next step: Talk to us

This checklist provides a general overview of opportunities at the start of the new tax year. Your personal circumstances, goals, and risk tolerance are unique, and the best course of action depends entirely on your individual situation.

The start of the 2025/26 tax year is the perfect time for a financial review. Please get in touch to schedule a meeting. We can help you understand how these allowances apply to you, ensure your financial plan is up-to-date, and make confident decisions for the year ahead.

Let's work together to make the most of the opportunities this new tax year brings.