Tax Year End Planning: What to Review Before 5 April 2026

With the end of the 2025/26 tax year approaching, now can be a sensible time to review your personal finances and make sure key allowances are being used effectively.

Many of these allowances are use-it-or-lose-it, and small decisions made now can reduce tax and improve flexibility later. If you are not already working with an Independent Financial Adviser, this time of year is often when people find that a conversation pays for itself.

A practical note on timing: 5 April 2026 falls on a Sunday, and Good Friday falls on 3 April 2026, which means Thursday 2 April 2026 is effectively the last working day for most tax year-end actions. If you are thinking about doing anything, it is worth moving sooner rather than later.

Key Takeaways

• ISA allowances are use-it-or-lose-it: the 2025/26 allowance is £20,000 per person and cannot be carried forward. [1]
• The annual CGT exempt amount is £3,000 for 2025/26. Gains above this threshold will generally be subject to Capital Gains Tax, regardless of your income tax position. [2]
• Most people can contribute up to £60,000 gross into pensions this tax year and receive tax relief, though contributions on which you can claim relief are restricted to your relevant UK earnings. Unused allowances from the previous three years may also be available to carry forward. [3]
• Inheritance tax annual gifting allowances are worth reviewing each year, and records of gifts matter. [4]
• Unused pension funds are expected to fall within the scope of inheritance tax from April 2027, making joined-up planning increasingly important. [5]
• Tax year end decisions work best when they connect to your wider financial plan, not just the calendar.

Why does tax year-end planning matter?

For most people, tax year-end planning is less about tax tricks and more about making sure the basics are in place. Allowances that are unused at 5 April are simply gone. Decisions made in good time, with a clear picture of your overall position, tend to produce better outcomes than those rushed in the final days of the tax year.

The areas that tend to matter most are ISA contributions, capital gains, pension contributions, and gifting. For families with more complex finances, there are additional considerations around the personal allowance trap, savings income, and the upcoming changes to pension and inheritance tax rules.

Below, we cover each area in plain terms.

How can you use your ISA allowance before UK Tax Year ends on 5 April 2026?

The ISA allowance for the 2025/26 tax year is £20,000 per eligible individual [1]. If you do not use it by 5 April, it cannot be carried forward.

Within an ISA, investments and cash can grow free from income tax and capital gains tax, and you do not need to report ISA income or gains to HMRC. ISA funds do form part of your estate for inheritance tax purposes, but the wrapper remains one of the most efficient options available for long-term savings and investing.

A few practical points worth keeping in mind:

• Each eligible individual has their own £20,000 allowance, so couples can shelter up to £40,000 between them in a single tax year.
• Cash ISAs can be useful for shorter-term reserves, while Stocks and Shares ISAs are generally used for longer-term investing and carry investment risk.
• If you are moving money between providers or investing a lump sum, avoid leaving it to the final week. Timing can catch people out.

ISA decisions should fit your wider plan, not just the tax year deadline. An Independent Financial Adviser can help you decide which type of ISA is appropriate, how much to contribute, and how it sits alongside your pensions and other investments.

What should you check for capital gains tax before the tax year ends?

If you sell investments held outside an ISA or pension, you may create a capital gain. The annual exempt amount for the 2025/26 tax year is £3,000 per individual [2]. Gains above this level will generally be subject to Capital Gains Tax. Capital losses must first be set against gains in the same tax year, with any unused losses available to carry forward.

For gains made on or after 6 April 2025, Capital Gains Tax (CGT) rates on most chargeable gains are 18% within the basic rate band and 24% above it [2]. Capital losses must first be set against gains in the same tax year, with any unused losses available to carry forward.

Practical planning points that often come up at this stage of the year include:

• Using the £3,000 exemption where it makes sense, rather than letting it go unused.
• Managing gains across tax years if you are planning staged sales.
• Ensuring capital losses are properly reported to HMRC, even in years where no tax is due, so they are available to carry forward.
• Considering whether moving more holdings inside ISAs or pensions might reduce future CGT exposure.

HMRC has increased its focus on undeclared gains, making accurate reporting more important than it has been in previous years. If you hold investments outside an ISA or pension and are unsure of your CGT position, speaking to an Independent Financial Adviser before the tax year ends can help you avoid an unwelcome surprise.

What inheritance tax allowances are worth revisiting before April?

Inheritance tax planning is usually about gradual, consistent action rather than one big move. The nil-rate band remains at £325,000, with the residence nil-rate band at £175,000 (subject to conditions) [4]. Both thresholds are frozen at current levels until April 2031.

Gifting is one of the main tools families use to reduce their estate over time. Common annual allowances include:

• The annual gifting exemption of £3,000 per person, with the ability to carry forward unused allowance from the previous tax year (up to £6,000 in total if the prior year was unused) [4].
• Small gifts of up to £250 per recipient to any number of people who didn’t receive the annual allowance. [4].
• Wedding and civil partnership gifts within set limits depending on the relationship [4].

Larger outright gifts may qualify as Potentially Exempt Transfers, becoming free of inheritance tax if the donor survives seven years from the date of the gift, though in some circumstances the 14-year rule may also be relevant and professional advice is recommended.  [4].

Good inheritance tax planning also depends on good record-keeping. If gifts are part of your strategy, tracking what was given, when, and to whom is genuinely helpful for family members later. A good IFA will keep this as part of your ongoing financial plan, so nothing slips through the gaps.

What is the upcoming change to pensions and inheritance tax?

This is an area many families will want to look at before making assumptions about their financial plan.

The government has confirmed that most unused pension funds and death benefits are expected to fall within the scope of inheritance tax from 6 April 2027 [5]. This does not mean everyone should rush to withdraw pension funds. It does mean that pension planning and estate planning are becoming more joined-up, and many families may need to revisit their existing thinking before 2027.

If you have a significant pension pot, or you have previously relied on the pension’s outside-estate status as part of your estate plan, it is worth talking this through with an Independent Financial Adviser sooner rather than later.

This is exactly the kind of joined-up planning where an IFA adds real value, bringing together your pension, estate, and investment strategy into one coherent picture.

How can pension contributions help at tax year-end?

Pensions remain one of the most tax-efficient planning tools available, but the rules are detailed and worth checking before making decisions.

For most people, the annual allowance is £60,000 for 2025/26, covering all contributions across pensions including employer contributions [3]. This can be reduced for higher earners through tapering, or if you have already accessed your pension flexibly.

A few important rules to be aware of:

• Personal contributions that receive tax relief are generally limited by your relevant UK earnings for the tax year [3].
• If you have no earned income, you can still receive basic-rate tax relief on contributions up to £2,880 net (£3,600 gross), provided you are under age 75 [3].
• If you have accessed your pension flexibly, the Money Purchase Annual Allowance of £10,000 may apply instead of the full allowance [6].

If you are considering a larger contribution, it is worth checking how tapering or the Money Purchase Annual Allowance (MPAA) affects your position before any money moves. An independent financial adviser can model the numbers for you and make sure the contribution fits within your annual allowance and earnings for the year.

Can you carry forward unused pension allowances?

Yes, in many cases you can. Unused annual allowance from the previous three tax years can be carried forward, provided you held a pension arrangement during those years, and you have first used the current year’s full allowance. The oldest unused allowance must be used first [3].

Carry forward is particularly worth exploring after a strong income year, a business sale, or a significant bonus. However, it still needs to sit within your earnings position and any tapered allowance rules, so checking the numbers before acting is important in order to obtain tax relief.

An Independent Financial Adviser can confirm how much carry forward is available and whether using it makes sense in the context of your wider plan.

How much tax-free cash can you take from a pension?

Although the lifetime allowance was abolished, tax-free cash is now controlled through the lump sum allowance rules. Generally, you can take up to 25% of your pension tax-free, up to a maximum of £268,275, unless you hold valid HMRC protections that change your position [7].

Defined benefit (final salary) pensions are included in these calculations, which is one reason retirement planning benefits from proper cashflow modelling rather than rule-of-thumb estimates.

How does pension planning affect the High Income Child Benefit Charge?

If you receive Child Benefit, it is worth checking where you stand if your household income is in the higher ranges.

The High Income Child Benefit Charge currently applies once income exceeds £60,000 and Child Benefit is fully withdrawn at £80,000 [8]. Pension contributions can reduce adjusted net income, which may help preserve some entitlement. The right approach depends on your wider financial position and cashflow.

What is the £100,000 personal allowance trap and how can you avoid it?

Once adjusted net income exceeds £100,000, the personal allowance is reduced by £1 for every £2 of income above that threshold. It becomes zero at £125,140 [9].

This creates an effective marginal tax rate of 60% on income between £100,000 and £125,140, which is higher than many people realise. Pension contributions are one of the most effective ways to reduce adjusted net income and bring it back below the threshold.

The personal allowance (£12,570) and the basic rate limit (£37,700) are both frozen until April 2031 [9], which means more people are likely to drift into this range as incomes rise over time.

Why does savings interest need reviewing at tax year-end?

With interest rates significantly higher than they were for much of the last decade, more people are experiencing unexpected tax on savings.

The Personal Savings Allowance is £1,000 for basic rate taxpayers, £500 for higher rate taxpayers, and nil for additional rate taxpayers [10]. Bank interest is paid gross, and any tax due needs to be declared separately.

If you hold larger cash balances outside ISAs, it is worth reviewing how that interest interacts with your other income before the tax year ends. In some cases, moving savings into an ISA can reduce the tax burden and simplify reporting.

An IFA can help you see whether your current cash holdings are sitting in the most efficient place.

Speak to an Independent Financial Adviser in Dorset About Tax Year End Planning

Deciding which allowances to use, when to act, and how each decision fits with everything else is rarely straightforward. The choices you make before 5 April can affect your tax position, your retirement income, and your family’s finances for years ahead.

At Baggette + Co. Wealth Management, we support individuals and families across Dorset and Hampshire with independent financial planning that brings clarity to decisions like these. As an independent financial advisers and Chartered firm, we take a whole-of-market view and help you understand how tax year end planning fits into your wider financial picture, including pensions, investments, inheritance planning, and longer-term goals.

Whether you want a one-off review before the tax year closes, or you are looking for ongoing advice that keeps your plan current, taking action now gives you more options. Leaving it to the final days often limits what is possible.

If you would like to review your position before the end of the 2025/26 tax year, speak to Oscar Hjalmas on 01202 676 983 or email [email protected].

FAQs about tax year-end planning

Sources

[1] HMRC – Individual Savings Accounts (ISAs) https://www.gov.uk/individual-savings-accounts

[2] HMRC – Capital Gains Tax: allowances and rates https://www.gov.uk/capital-gains-tax/allowances https://www.gov.uk/capital-gains-tax/rates

[3] HMRC – Tax on your private pension: annual allowance https://www.gov.uk/tax-on-your-private-pension/annual-allowance

[4] HMRC – Inheritance Tax: gifts and thresholds https://www.gov.uk/inheritance-tax/gifts https://www.gov.uk/inheritance-tax/threshold

[5] HMRC – Inheritance Tax: unused pension funds and death benefits (policy paper, updated November 2025) https://www.gov.uk/government/publications/inheritance-tax-unused-pension-funds-and-death-benefits

[6] HMRC – Money Purchase Annual Allowance https://www.gov.uk/guidance/pension-schemes-and-the-money-purchase-annual-allowance-mpaa

[7] HMRC – Pension lump sum allowance https://www.gov.uk/guidance/pension-lump-sum-allowance

[8] HMRC – High Income Child Benefit Tax Charge https://www.gov.uk/child-benefit-tax-charge

[9] HMRC – Income Tax rates and Personal Allowances https://www.gov.uk/income-tax-rates

[10] HMRC – Tax on savings interest https://www.gov.uk/apply-tax-free-interest-on-savings

Baggette + Co. Wealth Management is authorised and regulated by the Financial Conduct Authority. The Financial Conduct Authority do not regulate tax planning, cashflow planning and estate planning. The above information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon as, financial advice. Capital is at risk. A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change. You should seek advice to understand your options at retirement. Tax rules may change, and the value of tax reliefs depends on your individual circumstances.