By Kevin Taylor — Tax Director at Towers & Gornall
The clock is ticking… with the end of the tax year fast approaching, are you making the most of your potential tax savings and planning opportunities before time runs out?
Don’t forget, some of the current reliefs and allowances fall in the next tax year, so read on to ensure you maximise yours for 2025/26.
Here’s a checklist to help you review the key areas before the tax year ends on the 5th of April:
1) Take advantage of tax-free pension contributions
The standard amount that an individual can set aside tax-free each year for a pension is £60,000 – this is subject to income limits and any unused relief in the prior three tax years can be brought forward. Exceeding the available annual allowance will mean a tax charge arises, so those who think they may be affected should review their position. Higher rate tax repayments can be made on the annual tax return.
2) Use your ISA allowances
With some ISA limits reducing from 6 April 2026, it is particularly important to make use of any unused amounts available for 2025/26.
3) Avoid the child benefit clawback
Child benefit is clawed back where annual taxable income (or the taxable income of a partner) exceeds £60,000. Making personal pension contributions, Gift Aid donations or exchanging salary in return for employer pension contributions can reduce your taxable income to keep it below the £60,000 threshold.
4) Use Capital Gains Tax (CGT) annual exemptions
Everyone can realise capital gains up to the annual exemption tax-free, this is £3,000 in 2025/26. Married couples and civil partners can transfer assets between themselves on a no gain/no loss basis and such transfers should be considered so that both can benefit from their annual exemptions.
5) Match Capital Gains and Losses to reduce your tax bill
Capital gains and losses are aggregated on a tax year basis, so if you have assets e.g. shares sitting at a loss, and also a gain, these can be combined to enable assets to be sold without incurring CGT. Care should be taken to ensure the annual exemption is not wasted.
6) Consider paying yourself a dividend
It is generally more tax-efficient overall to withdraw profits from your company by way of dividends rather than salary. Several factors are involved, and it is always worth reviewing the position. The dividend allowance (the amount of dividend that can be received at 0% tax) is £500 for 2025/26. Ensure you have taken your tax-free dividend.
7) Make gifts to use Annual Inheritance Tax (IHT) allowances
With the standard Nil Rate Band (NRB) currently at £325,000 and the Main Residence NRB at £175,000, reducing the value of the part of your estate that is above the nil rate bands will save you IHT on your passing. Consider giving assets you do not need to other family members now. Gifts to a spouse or civil partner to enable them to use up their nil rate band are tax-free, and gifts to other family members can also be tax-efficient over time. Care needs to be taken when gifting non-cash assets, that no lifetime taxes (e.g. Capital Gains Tax) are triggered. Most lifetime gifts to individuals that are not covered by a lifetime exemption do not immediately trigger IHT and become totally exempt if you survive for seven years. These are known as Potentially Exempt Transfers.
Some gifts leave your estate at day one and you can give away up to £3,000 a year (this can be carried forward if unused for one year but thereafter is lost). Other gifts that leave your estate immediately include £250 to as many individuals as you like in a year, gifts on marriage (to certain limits), and gifts out of income.
More people are now falling into the IHT net due to the freezing of NRBs and increases in property values. If you are close to or above the NRBs, it would be advisable to review your IHT position to understand your current exposure and identify any steps that could be taken to mitigate a potential liability, particularly in light of the potential changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) in April 2026, and to pension funds from April 2027.
