Tax year end planning

With the new tax year on the horizon, now is a crucial time for individuals to make sure they have utilised the allowances and reliefs available to them before 5 April 2026. By doing so, you can achieve greater financial flexibility in the long term for you and your family, whilst reducing your tax exposure.

ISAs are not just for you but for other members of your family. Parents or grandparents can use them to transfer funds to future generations and assist children in saving for their future.

Income and capital gains generated are tax-free and not taxed when withdrawn. The government will add a 25% bonus on some ISAs.

The facts:

Utilising allowances and reliefs  

Being aware of the allowances and reliefs available and making the relevant changes to take advantage of them will benefit you and your wider family.

Most UK individuals are entitled to a tax-free personal allowance of £12,570 per year. This relief begins to taper for every £2 earned over £100,000, the allowance abates by £1 (effectively fully abates away when income levels exceed £125,140).

Savings and dividend allowances

These provide an opportunity for families to structure their savings and dividend income to benefit from these allowances.

From 6 April 2026, the tax on dividends is also increasing by 2% for basic rate taxpayers to 10.75% and higher rate taxpayers to 35.75% (the additional rate remains at 39.35%). 

Therefore, if you can control your remuneration, it may be beneficial to accelerate a dividend to ensure that you have fully utilised your allowances to benefit from these savings (For example, a basic rate taxpayer accelerating a £10,000 dividend would save £200 in tax). 

In addition to the above, another “allowance available” is the starting rate. This is a special 0% tax band that lets people with low earnings receive up to £5,000 of savings interest tax‑free. If your other income (like wages or pension) is below £17,570, you may get some or all of this £5,000 tax‑free allowance. The more you earn above your personal allowance (£12,570), the more this £5,000 band is reduced.

Trading and property allowances

These allowances are designed to exempt modest amounts of income, for example, from sales on eBay, Vinted and Amazon and rentals from Airbnb, driveways, etc. Each allowance is £1,000 tax-free.

Furthermore, if your income exceeds £1,000, but your expenses against the income do not exceed £1,000, you can claim the allowance as a deduction, reducing your taxable profit. 

In addition, rent-a-room relief can be claimed if part of your home is let out. Up to £7,500 can be received tax-free per house (e.g. £3,750 each if you jointly own the property).

Contributions to a pension benefit from tax relief at your marginal rate. If you are a higher-rate or additional-rate taxpayer, depending on the method in which contributions are made, you may have to reclaim the tax relief above the basic rate via self-assessment.

The amount you can contribute to a pension efficiently relies upon a number of factors.

Firstly, there is the annual allowance, which for this tax year is the lesser of £60,000 or 100% of your pensionable earnings, including any employer pension contributions. However, if you have already drawn an income from a pension or earn over £200,000, your annual allowance may be reduced to a minimum of £10,000.

Secondly, if your annual allowance is greater than your earned income, there is a limit on personal tax relief, which is the greater of 100% of your pensionable earnings or £3,600. This includes personal / employee and third-party pension contributions, but not pension contributions made by your employer. 

If you have no earnings, the maximum you can contribute is £3,600 gross, and if you are considering making a personal contribution, remember that it will benefit from tax relief, which will form part of your allowance.

Finally, there is also the ability to utilise any unused annual allowance in the previous three years, but you must always deplete the current tax year's allowance first, and of course, have the pensionable earnings to offset this level of contribution.

For additional guidance on making the most of your pension contributions, see our insights on Pension contributions: act now to maximise tax efficiency and Pension contribution opportunities for Partners.

Capital Gains Tax (CGT) occurs when you sell an asset for profit. This could be on a taxable investment, chattels (worth £6,000 or more, excluding cars), properties and so on, but the gain between the value from when you acquired the asset and when you sell it is taxable at your marginal CGT rate.

The CGT allowance is a negligible £3,000 for the 2025/26 tax year and the tax rates for CGT are 18% for gains (or parts of gains) falling within the basic rate band when added on top of income and 24% for any gains falling above the basic rate band on the bulk of assets.

The gain may push you into a higher tax bracket, so it is important to take note of your total income when factoring in the potential tax on a gain.

Any asset that is currently sitting at an unrealised loss, if disposed of, will be offset against an in-year gain first.

Transfers between spouses are exempt from capital gains tax, therefore, in some instances, it can be beneficial to transfer assets to maximise reliefs and tax bands.

There are solutions available to potentially help mitigate a CGT liability and you can contact us for more information on this.

A reminder, you have an annual allowance of £3,000 that you can gift from your estate each year without being subject to Inheritance tax. If you haven’t used the previous year’s allowance, you can carry it forward one year, increasing your available allowance for that specific year to a cumulative £6,000. This is another ‘use it or lose it’ allowance.

This has the benefit of immediately getting some wealth outside of your estate without tax implications. Larger gifts above this amount typically take up to seven years to fall outside of your estate, so this is a ‘quick win’ in comparison.

There are also separate allowances that do not use up your overall £3,000 annual limit:

• small gift allowance – this lets you gift up to £250 per person, if another allowance has not been used for them
• gifts for a wedding or civil partnership – this lets you give (on or shortly before the wedding date) up to:
  • £5,000 to your child
  • £2,500 to your grandchild or great-grandchild
  • £1,000 to anyone else.

In addition to the above, you can make 'surplus gifts' out of income. This lets you give unlimited amounts to someone if you can provide evidence that:

• the money comes from your regular monthly income
• you can afford the gift after covering your living costs.

This relief is more difficult to quantify than the limits stated above, therefore, careful consideration is required to ensure the gifts are eligible.

What is your IHT exposure? Try our IHT Calculator to estimate your IHT liability.

For more information on the updates to CGT and IHT, see our insight on Capital Taxes changes.

Income from jointly owned assets, i.e. bank interest, dividend income, and rental income, including furnished holiday lets, will automatically be split based on the beneficial ownership.

However, for jointly owned assets generating income held between spouses and civil partners, HMRC will assume an equal split.

To change the split, for property income, including furnished holiday lets and dividend income not from close companies, a declaration of trust must be in place and submitted to HMRC with a completed Form 17. 

This is a complex area and can have unintended tax consequences, and professional advice should be sought. 

In an ideal world, for a couple, the individual with the lowest marginal tax rate would hold the assets that generate income, thereby reducing the overall tax liability.

The reverse would be true for making Gift Aid payments, as the tax relief is higher for the individual with the highest marginal tax rate. 

Charitable donations

Gift Aid lets a charity claim extra money from the government when you donate — at no extra cost to you. When you give £1, the charity can claim an extra 25p from HMRC if you’ve paid enough UK tax that year to cover it.

If you’re a higher‑rate or additional‑rate taxpayer, you can also claim back extra tax relief yourself by including your Gift Aid donations on your Self-Assessment tax return. The charity gets 20%, and you claim the difference between your tax rate and the basic rate.

Another benefit of charitable donations is that they can assist with reinstating your personal allowance. If you know that your income is likely to be between £100,000 and £125,140, charitable donations can be an effective relief.

For example:

• an individual has taxable income of £101,250
• they decide to make a charitable donation of £1,000.

Doing this reduces their personal tax liability by £500 as their personal allowance would be fully reinstated.

The net cost to the individual is therefore £500 (£1,000 of donations less £500 of tax saving), however the charity will receive £1,250, making this an effective donation.

Given that charitable donations can be carried back to the previous year, donations made in the 2026/27 tax year can be carried back to optimise this position. 

See our insight Making Gift Aid donations for more information.

Gift of Shares to Charity

Another relief that is often overlooked is the gift of shares directly to charity. Only certain listed shares qualify for this relief. If you hold an asset that is currently qualifying and sitting at a gain, rather than selling the asset, you can gift the shares to charity. By doing this, you avoid paying potentially up to 24% CGT. The shares are valued at the date of the gift, and the gross value is deducted from your gross income.

Taking another simple example, if you are an additional rate taxpayer with capital gains above the annual exemption, it can be a significant saving.

If the listed shares are worth £10,000 and were acquired for £2,000, your tax saving would be as follows:

• CGT: £8,000 at 24%= £1,920
• Income tax: £10,000 at 45%= £4,500
• Total tax saved= £6,420

In this example, the net “cost” would be the £10,000 surrendered less the tax saved of £6,420 (£3,580).

Unlike with Gift Aid charitable donations, you cannot carry this back as any gift needs to be made prior to 5 April 2026, if you want to make the gift this year (as the value is taken at the date of the gift). Furthermore, no Gift Aid uplift is applicable so the charity will receive the £10,000 only with no top up from the government.

There are three key generic tax-efficient investments that individuals can invest in where income tax relief is available, which will reduce your tax liability.

Venture Capital Trusts (VCTs)

• Investments up to an annual maximum of £200,000 qualify for income tax relief at 30%*.
• Dividends received are tax-free.
• There is no CGT payable on any gain made when sold.

*A significant change to note is that the tax relief on VCT’s is reducing from 30% to 20% as at 6 April 2026.  

Enterprise Investment Scheme (EIS)

• Investments in qualifying companies up to an annual maximum of £1 million attract income tax relief at 30%.
• This limit is increased to £2 million where investments over £1 million are made in knowledge-intensive companies.
• If the investment is held for more than three years, any capital gain generated is exempt.
• Relief from CGT is available where an amount up to the level of the capital gain is reinvested in a company qualifying for EIS.
• The original capital gain is deferred until the EIS shares are sold, at which point the capital gain comes back into charge and is taxed at the prevailing rate.

Seed Enterprise Investment Scheme (SEIS)

• An individual can invest up to £200,000 per tax year in start-up companies that qualify for the SEIS.
• Income tax relief is at 50% of the investment.
• If the investment is held for more than three years, then any capital gain generated is exempt.
• Reduce capital gains in the year by up to 50% of the SEIS investment.
• If you have unutilised capacity in the 2025/26 tax year, the investments in both EIS and SEIS can be carried back, and income tax relief obtained in the earlier year.

Taking advantage of year-end tax planning should only be part of your overall tax planning strategy. Tax planning is all about putting into place a strategy that provides the right structure and security for your financial affairs. Your strategy should evolve and develop with time to enable you to plan for the future.

Finally, with the new tax year approaching, there is still time to act and put in place tax planning opportunities to help you and your family, partner, children, parents, and those closest to you.

For more information on how you can make the most of your tax planning opportunities, get in touch with your usual Crowe contact.