End of Year Tax Planning

As the 2025/2026 tax year draws to a close, it’s an ideal time to review your finances and ensure you’ve taken full advantage of all the allowances and reliefs available to you.

Investment Allowances

• Have you used your £20,000 ISA allowance?

• Have you used your £3,000 annual exemption for capital gains tax?

• Have you used your annual £500 dividend allowance?

Tax relief on Venture Capital Trusts investments, currently provide 30% tax relief. However, this will be reduced to 20% from 6 April 2026. We recommend getting investment advice but, if this is something you are interested in, it would be worthwhile speaking to an adviser before the relief takes effect.

Dividend tax rate changes

From April 2026, dividend tax rates are set to increase for basic rate and higher rate by 2%. The timing of declaring dividends this year could be crucial to maximise the current rates before they increase, however this requires detailed planning alongside your personal and companies’ finances.

Business Planning

• Could you restructure your borrowings to avoid heavily restricted financing costs?

• Could incorporating your business be the next step for you?

• Could reallocation of shares be a benefit to you and your family?

• Have you considered your profit-sharing agreement?

• Do you have up to date partnership or shareholder agreements?

• Have you considered forward planning on the sale of business assets due to the increase in Business Asset Disposal Relief rates from April 2026, from 14% to 18%?

Making sure your business is structured correctly can have a big impact on tax efficiency. If a change is something you are considering, please get in touch so that we can help make the process as smooth as possible.

Other allowances

• Have you applied for the marriage allowance transfer, and are you still basic rate taxpayers?

• Can shares/funds be transferred to a spouse to maximise personal allowances and tax thresholds?

• Have you made any gift aid donations to charity?

There are many ways in which you can help reduce your tax bill which are sometimes as simple as looking at the proportion of investments between spouses/civil partners. A common pitfall is that allowances go unused and therefore more tax is payable. If this is something you think could be affecting you, please enquire regarding the best tax position you could be in, and seek independent financial advice if necessary.

Employment

• Consider the timing of a PAYE bonus before the year end

• Consider utilizing all tax-free benefits available to employees

Significant income tax will likely be due if you have had a large payment increase within the tax year. If you are thinking about the bigger picture, make sure you consider the ways in which you could use this increase to your advantage, such as making contributions to your pension.

Pensions

• Have you used your £60,000 annual allowance for pension contributions (subject to your having sufficient earned income)?

• Have you started receiving State Pension during the year?

• Have you considered what tax free lump sums can be withdrawn from pensions (advice from a financial adviser is always recommended)?

• Have you made full National Insurance contributions for your State Pension in 2025/26?

Avoiding income cliff edges

• If your income is likely to fall in the £100,000 to £125,140 bracket you will be taxed at an eye-watering 60%

• If your income is likely to be over £50,270 then you will fall into higher rate tax bands

• If you/your spouse claim tax free childcare and believe your income is likely to tip over £100,000, you will lose this

• If you claim child benefit and either you or your spouse/civil partner/living partner are likely to earn over £60,000 this tax year, you will incur the High Income Benefit Charge - possibly losing it in full if earning over £80,000!

• Have you become a higher rate taxpayer meaning your savings allowance will half from £1,000 to £500?

• Have you become an additional rate taxpayer, meaning your savings allowance will disappear entirely?

If any of the above are likely to affect you, please get in touch so we can look at your individual circumstances to see if income timing, moving assets between spouses/civil partners, pension contributions or gift aid donations could help. 

Inheritance Tax (IHT)

• Have you used your annual gifting allowance of £3,000 to help with Inheritance Tax planning?

• Could you benefit from making regular gifts out of surplus income if your estate is likely to suffer IHT and you have income you do not need to maintain your current standard of living?

• Do you intend to make any gifts during the year, as these could fall outside of your estate after 7 years?

From April 2026, 100% Agricultural and Business Property Relief will be capped at £2.5 million per person, with any excess qualifying for only 50% relief.  This makes the spouse exemption, and the ability to use a combined £5 million allowance for married couples or civil partners, a key planning consideration.  As a result, formal relationship status and careful succession planning will be central to protecting farm assets from inheritance tax. 

From April 2027, most unused pension funds will be brought within the scope of Inheritance Tax, potentially increasing the taxable value of estates. This change may significantly affect estate planning strategies, particularly for clients who have relied on pensions as an IHT-efficient wealth transfer vehicle, and highlights the importance of the spouse exemption, as unmarried couples do not benefit from it.

Now is the time to review pension nominations, marital status, lifetime gifting plans and overall estate projections to mitigate future exposure. 

Making Tax Digital

The biggest change ahead of sole traders and landlords is the introduction of Making Tax Digital for Income Tax starting 6 April 2026. It is crucial that this is planned ahead for, and all your options are considered.  

• Have you hit the £50,000 combined self-employment and rental turnover threshold in 2024/25?

• Have you selected your HMRC compatible software?

• Have you considered how you will manage quarterly bookkeeping and reporting?

• Have you signed up for Making Tax Digital for Income Tax?

Quarterly reporting may seem daunting, but we are here to help. Whether you want to prepare the submissions yourself, ask us to check and report your figures, or have us take the load off and do all the work for you, please get in touch.

FUTURE CHANGES

Income Tax increase on savings and rental income

Also from 6 April 2027, the income tax rates on savings interest and rental (property) income are increasing by 2 percentage points across all bands, meaning basic, higher and additional rate taxpayers will pay 22 %, 42 % and 47 % respectively on these income streams.

From April 2027, income tax ordering rules will be changed so that your personal allowance will only be set against your property and savings income after it has been applied to your salary, trading or pension income.  This means people with mixed income (salary + rent or savings) may pay more tax than before.

Savers should take the year ahead to look at their savings to make sure they are making best use of tax efficient savings options, such as ISAs.

ISAs

From 6 April 2027, the cash component of your ISA annual subscription limit will be restricted to £12,000 within the overall £20,000 ISA limit (with exceptions for over‑65s who can still put up to £20,000 into a cash ISA each year), with £8,000 being restricted to investments.

The best way to head into the new tax year is to plan ahead and get expert advice. Please contact us, we are here to help.

We are here to help provide you with the best advice tailored to your business needs.