Tax year end planning checklist for the 2025/26 tax year

As the end of the 2025/26 tax year approaches, there is still time to make use of your available reliefs and allowances. The majority of planning strategies have the greatest effect if implemented before a tax year begins.

This tax year end planning checklist covers the main planning opportunities available to UK resident individuals and aims to inspire action to reduce tax for the 2025/26 tax year and to plan ahead.

Income tax

• You could reduce taxable income below £125,140, if suitable for your circumstances, to avoid the additional rate of income tax at 45%. Pension contributions remain one of the most effective ways to reduce taxable income.
• For married couples / civil partners, ensure each of you has sufficient income to use your personal allowance of £12,570, which remains frozen until 5 April 2031.
• The personal allowance is gradually withdrawn for individuals with adjusted net income above £100,000. For every £2 of income above this level, £1 of personal allowance is lost. Pension contributions made before 6 April 2026 can reduce income to £100,000 and restore all or part of the personal allowance.
• Reinvest in tax-free investments, such as ISAs, to replace taxable income and gains with tax-free income and gains, or consider investment bonds which can deliver valuable tax deferral.
• Investments delivering tax-free, potentially tax-free and/or tax-deferred income can be beneficial compared to income-producing investments that may erode personal allowances. Note that once an investment bond gain is triggered (for example, on encashment), it is included in an individual’s income without top slicing when assessing entitlement to the personal allowance.
• Redistribute investment capital between spouses / civil partners to potentially reduce the rate of tax suffered on income and gains. No capital gains tax or income tax liability arises on outright transfers between married couples or civil partners living together, including transfers of investment bonds.

Any transfer must be on a no-strings-attached basis to ensure the correct tax treatment applies.

Capital Gains Tax (CGT)

Capital gains tax planning involves taking action ahead of, or at the time of, a disposal to eliminate or reduce current or future CGT liabilities. This may involve:

• timing of disposals;
• making full use of exemptions and reliefs;
• transferring assets between spouses / civil partners;
• using the annual exempt amount; and
• utilising capital losses.

CGT planning points:

• Maximise use of the annual exempt amount of £3,000 for 2025/26. Any unused amount cannot be carried forward – “use it or lose it”.
• To defer CGT for a year, make disposals after 5 April 2026.
• To use two annual exemptions in quick succession, consider making one disposal before 5 April 2026 and another after 6 April 2026.
• Ensure each spouse / civil partner uses their annual exemption where possible. Assets can be transferred tax-efficiently between spouses / civil partners to facilitate this.

Transfers must be outright and unconditional, and care should be taken not to fall foul of anti-avoidance rules where assets showing a loss are transferred.

It should also be borne in mind that disposals of UK residential property generally require a CGT return and payment within 60 days of completion.

Inheritance Tax (IHT)

• Everyone has an annual gift exemption of £3,000. Any unused exemption can be carried forward for one year only, so use any available brought-forward exemption before 6 April 2026.
• The £250 small gifts exemption per recipient cannot be carried forward and can be used for multiple individuals, provided the recipient does not also benefit from the £3,000 exemption.
• For those with surplus income, regular gifts out of income may qualify for the normal expenditure out of income exemption. This can be an effective way of reducing an estate while maintaining control over capital.

The nil rate band (£325,000) and residence nil rate band (£175,000) remain frozen until at least 5 April 2031, with the residence nil rate band tapering once estates exceed £2 million. As asset values rise, early inheritance tax planning remains essential.

Savings & investments

Savings income and dividends

• Ensure each spouse / civil partner uses their personal savings allowance (£1,000 for basic rate taxpayers, £500 for higher rate taxpayers).
• The dividend allowance is £500 for 2025/26.
• Those able to control dividend income, such as owner-managed company directors, may wish to ensure dividends do not exceed the allowance.
• The £5,000 starting rate band for savings may still be available where non-savings income is low.
• Where interest is due shortly after 5 April 2026, closing an account before the tax year end may bring interest into the 2025/26 tax year and allow better use of allowances.

ISAs & JISAs

• ISA allowance: £20,000
• Junior ISA allowance: £9,000

Unused allowances cannot be carried forward, so subscriptions should be maximised before 6 April 2026.

Enterprise Investment Schemes (EISs) & Venture Capital Trusts (VCTs)

For relief in 2025/26, subscriptions must be made before 6 April 2026:

EIS:

• Up to £1 million can be invested (£2 million for knowledge-intensive companies)
• Maximum 30% income tax relief
• Capital gains tax deferral available
• Shares to be held for minimum 3 years

VCT:

• Up to £200,000 maximum investment
• Maximum 30% income tax relief (relief will be reducing to 20% for VCTs from 6^th April 2026)
• No ability to defer capital gains tax, but dividends and capital gains generated on amounts invested within the annual subscription limit are tax free
• Shares to be held for minimum 5 years

These investments carry higher risk and lower liquidity and are not suitable for all investors.

Investment bonds

• Investment bonds can provide valuable tax deferral.
• Consider deferring encashment until a year when income is lower, or use the 5% tax-deferred withdrawal facility.
• Alternatively, it may be beneficial to trigger a chargeable event gain before the end of the tax year if a higher marginal tax rate is expected in future.

Pensions

• The annual allowance is £60,000 for 2025/26.
• Unused allowances can be carried forward for up to three tax years.
• Tapered annual allowance applies where threshold income exceeds £200,000 and adjusted income exceeds £260,000, with a minimum allowance of £10,000.
• Pension contributions can help restore the personal allowance for those with income between £100,000 and £125,140, creating effective tax relief of up to 60% or more.
• Pension planning can also reduce exposure to the High Income Child Benefit Charge, which for 2025/26 applies where income exceeds £60,000 and is fully withdrawn at £80,000.
• Individuals may contribute up to £2,880 net (£3,600 gross) each year for non-earning family members, including children and grandchildren.
• The lifetime allowance has been abolished, though lump sum limits continue to apply.

If you would like to discuss your options ahead of the end of the 2025/26 tax year, please contact us here.

Articles on this website are offered only for general information and educational purposes. They are not offered as, and do not constitute, financial advice. You should not act or rely on any information contained in this website without first seeking advice from a professional.

 Past performance is not a guide to future performance and may not be repeated. Capital is at risk; investments and the income from them can fall as well as rise and investors may not get back the amounts originally invested.

Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For guidance, seek professional advice. The Financial Conduct Authority does not regulate estate planning or tax planning.

 Date written: 29th January 2026

Approved by Evolution Wealth Network Ltd on 10/02/2026.