With another tax year coming to an end, it is time to ensure that your tax affairs are arranged in the best way possible. Efficient year-end tax planning can reduce your tax liabilities and ensure that you make full use of all available allowances and reliefs.
We have compiled a checklist and some key planning points that you may wish to consider before 5th April 2026.
Utilise available allowances
The UK tax system offers a range of tax-free allowances and reliefs that can help reduce your taxable income. These include:
Personal allowance
For the 2025/2026 tax year, the personal allowance is £12,570. This is unchanged from 2024/25.
The allowance is the amount you can earn before paying income tax. However, this is reduced if your income exceeds £100,000, by £1 for every £2 earned over the threshold.
Savings allowance
Basic rate and higher rate taxpayers receive a savings allowance of:
£1,000 for basic rate taxpayers
£500 for higher rate taxpayers.
Please note that additional rate taxpayers are not entitled to a savings allowance.
Any savings amounts received over the allowance are subject to tax at the following rates for the 2025/2026 and 2026/2027 tax years:
20% for basic rate taxpayers
40% for higher rate taxpayers
45% for additional rate taxpayers.
From 6 April 2027, these rates will be increased by 2% so that amounts received over the allowances will be subject to tax at:
22% for basic rate taxpayers
42% for higher rate taxpayers
47% for additional rate taxpayers.
Dividend allowance
The dividend allowance for the 2025/2026 tax year is £500. Using this allowance increases your tax-free income. Dividend income received above this allowance is subject to tax at:
8.75% for basic rate taxpayers
33.75% for higher rate taxpayers
39.35% for additional rate.
From 6 April 2026, the rates for basic rate and higher rate taxpayers in respect of dividend payments are also increased by 2%, but there is no change to the additional rate tax. Therefore, the amounts received over the allowances will be subject to tax as follows:
10.75% for basic rate taxpayers
35.75% for higher rate taxpayers
39.35% for additional rate (no change).
Property rental income
From 6 April 2027, new rates of income tax are being introduced against rental income. These rates will be 2% higher than the standard income tax rates as follows:
22% for basic rate taxpayers
42% for higher rate taxpayers
47% for additional rate.
Pension contributions
The annual allowance for pension contributions is £60,000.
Although you can receive tax relief on pension contributions, thereby reducing potential tax liabilities, it is important to note that the allowance may be tapered if your income is above £260,000 or lowered if you have already accessed your pension.
Carry forward unused allowance
If you have not used your full pension allowance in the past three years (2022/2023, 2023/2024 and 2024/2025) you may be able to carry it forward to the current year.
Individual Savings Accounts (ISAs)
For the 2025/2026 tax year, the annual ISA allowance is £20,000.
ISAs allow you to save and invest without being subject to tax on interest, dividends, or capital gains. The interest that you receive from an ISA will not affect your savings allowance. It is worth considering whether you have used your full ISA allowance and if not, how you can utilise this to reduce your exposure to tax.
Please note that from 6 April 2027, although the ISA limit will remain at £20,000, the cash component of the annual ISA allowance will be restricted to £12,000, for anyone under 65 years old.
Tax-efficient investments
There are also tax-efficient schemes available for investing in that can provide income tax relief. A couple of them are:
Enterprise Investment Schemes (EIS)
If you were to invest in an EIS then you can claim up to 30% income tax relief on investments up to £1m, as long as the shares are held for at least three years from the date of issue. EIS also allows you to defer Capital Gains Tax (CGT) on assets sold, up to the amount subscribed in an EIS qualifying company. Please contact us if you would like further information.
Seed Enterprise Investment Schemes (EIS)
SEIS can also provide a generous tax relief for individuals investing in new, unquoted companies. Individuals can invest up to £200,000 per tax year in qualifying companies, and will receive income tax relief of 50% of the amount invested. Any capital gains arising on the disposal of shares through SEIS are exempt from CGT, if they have been held for three years or over.
If any shares are sold at a loss, the investors can offset the loss against the income tax or capital gain tax arising in the year.
Venture Capital Trust (VCT)
Income tax relief of 30% is also available on investments made into a VCT, up to £200,000, with tax-free dividends and an exemption from capital gains tax on the shares.
From 6 April 2026 the income tax relief on VCT’s will reduce to 20%.
Gift Aid donations
Charitable donations made under gift aid can be used to increase your basic rate band for higher rate and additional rate taxpayers.
Check whether your donations qualify for Gift Aid and whether they are appropriately recorded before the end of the tax year.
You will not get relief if you are a basic rate taxpayer, and may have to pay back any Gift Aid claimed.
Capital Gains Tax (CGT) planning
The CGT annual exemption for the 2025/2026 tax year is £3,000.
Ensure you have utilised your CGT exemption, as this cannot be carried forward. It is also worth considering if there are any capital losses you could realise, which can be used to offset any gains you have made, reducing the amount of capital gains tax you need to pay.
Spousal/civil partner transfers
A reminder that you can transfer assets to your spouse or civil partner without triggering CGT, as transfers between spouses/civil partners are exempt from Capital Gains Tax. You may want to consider this if your spouse/civil partner has not used their CGT allowance, tax can be saved by using their CGT annual exemption on any disposal.
Business Asset Disposal Relief
Business Asset Disposal Relief (BADR) is a relief given towards the CGT amount payable on qualifying disposals, up to a lifetime limit of £1 million. Rather than paying CGT rates of 18%/24%, BADR allows gains on qualifying disposals to be charged at a rate of 14% for the 2025/2026 tax year.
From 6 April 2026, the rate is increased to 18%. Therefore, any disposals that may qualify for BADR will be paying an extra 4% in CGT from the 2026/2027 tax year onwards.
However, for BADR to be allowable, there are qualifying conditions that need to be met. Please get in touch with us if you are currently considering selling your business and need to check if the conditions have been met.
Inheritance Tax (IHT)
Gifts are exempt from IHT up to a total of £3,000 in each tax year. You may also have your annual exemption available from the previous year (2024/2025) if this was not used. This will be lost if not used in 2025/2026.
Business Property Relief (BPR) and Agricultural Property Relief (APR) changes
For transfers taking place before 5 April 2026, IHT relief at 100% is available on qualifying business and agricultural assets without any financial limit. From 6 April 2026, 100% relief will be limited to a combined £2.5 million allowance of business and agricultural assets per individual. Any qualifying assets over this threshold will be subject to 50% relief. The 100% allowance can be used to cover any combination between assets qualifying for BPR or APR.
Anti-forestalling rules apply to lifetime gifts made between 30 October 2024 and 5 April 2026 where death occurs within seven years. Broadly, whilst 100% relief will be available on the initial transfer, 100% relief will be limited to £2.5 million in calculating additional inheritance tax payable on the transferor’s death.
Any unused portion of the £2.5 million allowance may be transferred to a surviving spouse or civil partner on death.
Making Tax Digital for Income Tax
The first phase of Making Tax Digital for Income Tax is being introduced from 6 April 2026.
Making Tax Digital for Income Tax will affect many individual taxpayers, and those within scope will need to maintain digital records and submit quarterly income and expenditure updates to HMRC. There are some limited exemptions, for example, for those who are unable to make digital submissions because of age or lack of internet access.
From 6 April 2026, Making Tax Digital for Income Tax will initially impact sole traders and/or landlords with gross income of over £50,000. However, this income threshold will be reduced to over £30,000 from 6 April 2027 and over £20,000 from 6 April 2028.
This will be a major change in the way that income and expenses are reported, and the first phase will be starting soon. If you had gross self-employment income or rental income in excess of £50,000 in 2024/25, please seek advice on how to start the registration process immediately. The time limit for registration is 5 April 2026.
In summary
We have set out this checklist for you to think about when considering end-of-year tax planning. Before taking any actions, it may be best to seek tax advice to ensure that the appropriate actions are taken.
Contact
If you would like to discuss any tax queries with one of our experts, please call our Leicester office on 0116 254 9262, or Loughborough office on 01509 263500. Alternatively, our contact form is here.