As the end of the tax year looms, think of your allowances like tickets to a once-a-year sale: if you don’t use them, they expire.
A few thoughtful steps now – boosting pensions, maxing out ISAs, or trimming capital gains – could save you thousands in tax and leave more of your money where it belongs: with you, not HMRC.
Maximise pension contributions
Your pension remains one of the few places where the taxman effectively gives you money back – and that’s not an offer to ignore. Most people can contribute up to £60,000 of their total annual Net Relevant Earnings, whichever is lower, into their pension each tax year. Go above this, and the Annual Allowance tax charge on the excess will quickly remind you that generosity has its limits.
Tax relief is where the magic happens. Basic-rate taxpayers get 20% added automatically, meaning every £80 you put in becomes £100 overnight. Higher and additional-rate taxpayers can claim even more through self-assessment, trimming their tax bills and boosting their retirement pots simultaneously. If you’ve under-contributed in the past three tax years, you can carry forward any unused allowances, providing you were part of a registered pension scheme and have not triggered the Money Purchase Annual Allowance (currently £10,000).
High earners should watch out for the tapered annual allowance. Once your adjusted income tops £260,000, your allowance starts to shrink, potentially down to £10,000. Planning ahead can help you avoid a nasty surprise from HMRC.
For company directors and business owners, employer contributions can be especially valuable. They usually reduce taxable profits, making pensions one of the most sophisticated ways to move money from your business into your future.
ISA allowances
The ISA is a true British classic – dependable, tax-free, and quietly working in the back-ground. Each adult can invest up to £20,000 per tax year across all ISAs, whether that’s Cash, Stocks & Shares, Lifetime or Innovative Finance. Within these wrappers, your savings are free from income tax, dividend tax, and capital gains tax – a rare trifecta of tax-efficiency that’s increasingly valuable as other allowances shrink.
How you split your ISA allowance depends on your goals. Cash ISAs are ideal for peace of mind and short-term access, while Stocks & Shares ISAs can add long-term growth potential. Parents (or grandparents) can squirrel away up to £9,000 per child in a Junior ISA, helping to fund future university fees or house deposits. The Lifetime ISA offers a generous 25% government bonus (max. £1,000), though there are plans to replace it with a simpler ISA to support first-time home buyers.
Tip: You can open a LISA before age 40 and contribute up to £4,000 a year until 50. Bonus only applies if the money is used to buy your first home (up to £450,000) or withdrawn after age 60.
Managing Capital Gains Tax (CGT)
Each individual has a £3,000 annual exempt tax-free allowance for 2025/26, and if you don’t use it before 5 April, it’s gone for good. Selling a few investments to realise gains within that limit can be an easy, pain-free way to bank profits tax-free.
For the more savvy investor, the “Bed and ISA” trick can be effective: sell investments to realise gains, then immediately repurchase them within an ISA. This shelters future growth from CGT completely.
Tip: If you have made losses elsewhere, it is important you report them to HMRC within four years – those losses can offset future gains.
Couples can also double their allowances by moving assets between spouses or civil partners – such transfers are CGT-free, letting you rebalance portfolios and keep both parties (and HMRC) happy.
[i] With the tax year-end fast approaching, now is the perfect time to fine-tune your finances and ensure optimal tax-efficiency. Call 03300 564 446 to learn more.
This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
