UK Tax Allowances: Ways to Make the Most of 2025/26 Before 5 April

As the end of the UK tax year approaches, it’s crucial to make the most of available tax allowances before the 5th of April. With inflation impacting your finances, the freezing of income tax thresholds until at least 2031, and rising living costs, optimising your UK tax allowances has never been more important. This guide will explore key allowances available for the 2025/26 tax year and how you can strategically plan your finances for the future.

UK Tax Allowances You Should Use Before the End of the Tax Year

Whether you’re looking to save for the future, reduce your taxable income, or pass on assets to loved ones, knowing which allowances to use before the end of the tax year is essential. Here are the primary allowances you can take advantage of:

1. Personal Allowance and Marriage Allowance

• Personal Allowance: For the 2025/26 tax year, you can earn up to £12,570 tax-free. However, once your income exceeds £100,000, this allowance begins to taper off and is entirely phased out by an income of £125,140. Planning for this can help mitigate higher tax liabilities.
• Marriage Allowance: If one spouse or civil partner earns below the personal allowance threshold, they can transfer up to 10% of their allowance to the other partner, reducing the higher earner’s tax bill. This could save up to £250 per year for eligible couples.

2. Savings Allowances

• Personal Savings Allowance: If you’re a basic-rate taxpayer, you can earn up to £1,000 in savings interest tax-free. For higher-rate taxpayers, the allowance drops to £500, and additional-rate taxpayers are not eligible for this relief.
• Starting Rate for Savings: If your non-savings income is below £12,570, you could be eligible to earn up to an extra £5,000 of interest taxed at 0%. This starts to taper off as your other income rises.

3. Capital Gains Tax (CGT) Annual Exempt Amount

• CGT Exempt Amount: For individuals in the 2025/26 tax year, the annual exempt amount stands at £3,000. If you’re married or in a civil partnership, both you and your partner can combine your allowances, creating a £6,000 buffer for jointly held assets. This allowance can be particularly useful when selling assets like shares, second properties, or collectibles.

4. Dividend Allowance

• Tax-Free Dividends: If you own shares, you can earn up to £500 in dividends tax-free in 2025/26. This allowance will gradually decrease over time, so if you have investments, using this allowance now could help reduce your tax burden.

5. Inheritance Tax (IHT) Allowances

• Annual Gifting Exemption: Every individual has a £3,000 annual exemption for IHT, which can be carried forward for one year if unused. You can also gift up to £250 to as many people as you like without it counting towards your £3,000 exemption.
• Marriage and Civil Partnership Gifts: In addition to the £3,000 annual exemption, you can gift £5,000 to a child, £2,500 to a grandchild, or £1,000 to anyone else as part of a wedding gift.

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Strategic Planning for UK Tax Year-End Planning 2025/26

The end of the tax year (5 April) is the deadline for using your tax-free allowances. Here’s how to plan your UK tax year-end planning 2025/26 strategy:

Use Your ISA Allowance

ISAs offer a valuable opportunity to save or invest without paying tax on the returns. You can contribute up to £20,000 into an ISA in 2025/26. Contributions can be spread between Cash ISAs, Stocks & Shares ISAs, and Innovative Finance ISAs. Since this allowance cannot be carried forward, you must use it before the end of the tax year.

• Cash ISAs: These are best for short-term savings, as they offer competitive interest rates with tax-free earnings.
• Stocks and Shares ISAs: These offer the potential for higher long-term returns, although with some market volatility. They’re best used for medium- to long-term goals, such as retirement planning.

Maximise Pension Contributions to Take Full Advantage of Tax Year End Allowances 2025/26

Pensions are one of the most tax-efficient ways to save for retirement. The personal contributions you make to a pension qualify for tax relief, which can significantly reduce your taxable income.

• The annual allowance for pension contributions is £60,000 for most people, but this may taper down for those with income over £200,000. Even if you don’t contribute the full £60,000, making regular contributions can help maximise your savings while reducing your current tax liability.

Consider Capital Gains Tax Planning

Capital gains tax applies when you sell assets such as stocks, bonds, property (excluding your primary home), or other investments. To make the most of your £3,000 annual exemption, consider spreading the sale of assets over multiple years or using your spouse’s exemption as well. Be aware of the tax rates on gains, which are 18% for basic-rate taxpayers and 24% for higher-rate taxpayers.

Understanding the Impact of Inflation and Income Thresholds

With the UK facing rising inflation, the value of your personal savings and investments is at risk. This makes using tax allowances to reduce your taxable income and maximise growth even more crucial.

The freeze on income tax thresholds until 2031 means that more individuals are being pushed into higher tax bands due to wage inflation. It’s essential to consider tax-efficient strategies to offset this, including contributions to pensions, ISAs, and gifts to reduce your taxable estate.

The Importance of UK Tax Year-End Planning 2025/2026

The tax year-end planning process is crucial for securing long-term financial health. By proactively managing your allowances and tax-free contributions, you can reduce your taxable income and optimise your savings. Every year offers an opportunity to re-evaluate your financial position and ensure that you are making the most of the tax benefits available.

At Apex Accountants, we can help you navigate the complexities of the UK tax system. Our expert advice ensures that you stay on track with tax-efficient savings and investments.

How We Can Help You Take Full Advantage of UK Tax Allowances

At Apex Accountants, we offer tailored tax planning and accounting services to ensure your financial strategy is in the best possible shape. Whether you’re looking to make the most of your tax year-end allowances 2025/26 or need assistance with long-term wealth planning, we provide expert advice and solutions.

Tax Advice and Planning

Our tax advisors can help you optimise your use of tax allowances, reduce your taxable income, and ensure compliance with the latest HMRC regulations.

Pensions and Retirement Planning

We offer guidance on pension contributions, tax relief, and other retirement planning strategies, helping you make the most of your pension pot.

Capital Gains Tax and Inheritance Tax Planning

Our experts can help you manage capital gains and inheritance tax efficiently, ensuring that you maximise exemptions and avoid unnecessary tax liabilities.

By making strategic use of these tax year end allowances 2025/26, you can ensure that your finances are in the best possible position as we head into the next tax year. Remember, the key is to plan and make the most of every tax-saving opportunity before the 5th of April deadline.

For more advice on UK tax year-end planning 2025/2026, or if you need assistance with any tax-related matters, feel free to reach out to us. We’re here to help guide you through the process and ensure you take full advantage of the tax allowances available.

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FAQs on Tax Year-end Allowances 2025/26

1. Is the personal tax allowance going up in 2025–26?

No, the personal tax allowance remains at £12,570 for the 2025/26 tax year. There are no confirmed plans for an increase in the personal allowance for this period.

2. What are the tax allowances for 2025–26?

For 2025/26, key allowances include the personal allowance (£12,570), savings allowance (£1,000), dividend allowance (£500), capital gains tax exemption (£3,000), and various gifting and inheritance tax exemptions.

3. Is HMRC considering raising the personal tax allowance from £12,570 to £20,000?

No, HMRC has not announced any plans to raise the personal tax allowance to £20,000. It remains at £12,570 for the 2025/26 tax year without major changes anticipated.

4. What are the tax thresholds for 2025?

The income tax thresholds for 2025 include the personal allowance of £12,570, the basic rate at £12,571–£50,270, and the higher rate between £50,271–£150,000, with the additional rate above £150,000.

5. What is the dividend allowance for 2025–26?

For 2025/26, the dividend allowance is £500. Tax on dividends above this allowance is charged at 8.75% for basic rate, 33.75% for higher rate, and 39.35% for additional rate taxpayers.

6. Is the UK tax allowance changing in 2025?

The UK tax allowance will remain the same for 2025, with the personal allowance staying at £12,570. However, it is important to note that the allowance will gradually be phased out for individuals with income above £100,000, and it will be lost entirely for those earning over £125,140.

7. What is the tax exemption limit for assessment year 2025/26?

The tax exemption limit for the 2025/26 assessment year will depend on the specific type of tax relief or exemption. For example, the personal allowance remains £12,570, and the inheritance tax annual exemption is £3,000. Other allowances, like the capital gains exemption, may also apply to certain assets.

8. How much tax will I pay in 2025/26 UK?

The amount of tax you will pay in the 2025/26 tax year depends on your income level and type. The personal tax allowance is £12,570, and income above this will be taxed at varying rates. For example, income between £12,570 and £50,270 will be taxed at the basic rate of 20%, while income over £50,270 is taxed at 40% and above £150,000 at 45%. Calculating your exact tax depends on your earnings, tax code, and deductions.