Spring clean your finances: planning for the 2025/26 tax year
The arrival of Spring brings with it more than just longer days and the promise of warmer weather. It conveniently coincides with the start of the 2025/26 tax year, making now the ideal time for a financial “spring clean”.
When the new tax year began on 6 April 2025, several annual tax-efficient allowances and exemptions reset, providing you with a clean slate. This can offer valuable opportunities to optimise and refresh your financial strategy. And, in some cases, the earlier you take advantage of tax-efficient vehicles, the more you could benefit from tax efficiency and investment returns over the long term.
To get started, you could consider focusing on these key areas.
Make the most of your ISA allowance by contributing early
For many, ISAs remain the cornerstone of tax-efficient saving and investing. This is because any gains you make are free from Capital Gains Tax (CGT), Income Tax, and Dividend Tax.
You can open and pay into multiple adult ISAs, but you cannot exceed the annual contribution limit, which is currently fixed at £20,000 until 2030.
The most popular types of ISAs are Stocks and Shares and Cash ISAs.
- A Stocks and Shares ISA is a tax-efficient investment account that allows you to invest in a variety of assets.
- A Cash ISA is a type of savings account where you earn tax-free interest on your savings.
Remember, the longer your money is invested within these tax-efficient wrappers, the more time it has to potentially grow.
The earlier you invest, the greater your returns could be over the years, too. In fact, reports from This Is Money suggest that investing your full £20,000 annual ISA allowance at the start of the year rather than at the end could lead to increased growth – potentially by more than £31,000 after 10 years.
So, if it’s suitable for your circumstances and financial situation, you could consider contributing to your ISA sooner rather than later and potentially see more growth.
Spring clean your finances – enhance your pension planning with tax-efficient contributions
Pension planning is vital for securing your financial future, and a new tax year can provide the ideal opportunity to review your contributions and growth.
The Annual Allowance for pension contributions currently stands at £60,000, subject to certain restrictions, such as your annual earnings and whether you have flexibly accessed your pension. It’s important to be aware of the “carry forward” rule, where you can use any of your unused Annual Allowance from the previous three tax years.
Remember, for every contribution you make within the Annual Allowance, the government adds tax relief, effectively boosting your retirement savings.
You will usually get 20% basic-rate relief automatically, and you may be able to claim higher amounts through self-assessment if you are a higher- or additional-rate taxpayer:
- Higher-rate taxpayers can claim an additional 20% back.
- Additional-rate taxpayers can claim an additional 25% back.
Planning your pension contributions early in the tax year could help ensure you’re making full use of your £60,000 Annual Allowance and appropriately benefiting from tax relief.
In addition, looking at your pot(s) and reviewing how your wealth is invested, with the help of a professional, may also mean you’re able to maximise potential growth this year and in the future.
Remember, you can’t access your private pension funds until you reach the age of 55. This is increasing to 57 from 6 April 2028.
Explore methods to mitigate Capital Gains Tax
CGT is a tax on the profits you make when you sell or dispose of an asset that has increased in value since you acquired it. You will only need to pay tax on amounts above the Annual Exempt Amount, which is currently £3,000 (reduced from £6,000 in 2023/24, and £12,300 in 2022/23).
As the new tax year begins, it could be a good time to consider any potential capital gains you expect to realise during the year. Think about how you could manage them and any potential CGT charges, particularly as the Annual Exempt Amount has gone down in recent years.
One effective strategy is to use tax-efficient wrappers such as ISAs and pensions. Investing within these structures means that any gains realised on assets held within them are not subject to CGT. Here, proactive planning could help you mitigate your CGT liability.
If you are planning to dispose of assets that are likely to incur CGT, such as a second home, business shares, or non-ISA holdings, talk to your financial adviser to discuss your options in more depth.
Gift money to loved ones throughout the year to help reduce Inheritance Tax later on
Inheritance Tax (IHT) is an important consideration for many, and the start of the new tax year means a reset of certain gifting allowances.
Making the most of these over the year could help reduce the IHT liability your beneficiaries face later, as you are effectively reducing the size of your estate.
Here’s what to keep in mind when gifting:
- Each tax year, you can gift up to your annual exemption to anybody and have this amount fall outside your estate. In 2025/26, the annual exemption stands at £3,000.
- If you’re married or in a civil partnership, you can combine your annual exemptions and gift up to £6,000 IHT-free.
- You can carry forward any unused annual exemption from the previous tax year, enabling you to gift a total of up to £6,000 or £12,000 as a couple in a single tax year.
- You may only carry your annual exemption forward for one year.
- For weddings and civil ceremonies, you can gift your child £5,000, your grandchild £2,500, and up to £1,000 for anyone else, and have this value fall outside your estate.
- You can gift up to £250 to as many people as you’d like each tax year, as long as the recipient hasn’t benefited from other financial gifts from you.
By making use of these allowances each tax year, you could gradually reduce the value of your estate without having to worry about IHT being charged on these gifts. For this reason, regular gifting within the tax-efficient limits can be a valuable part of a long-term IHT planning strategy.
Are you ready to spring clean your finances? Working with a financial adviser can help you get organised
Navigating the complexities of tax allowances, investment options, and long-term financial planning can be challenging on your own. Talking to a financial adviser could help, particularly if you set some time aside each year to spring clean your finances and rework your plan as needed.
If you are ready to spring clean your finances an adviser can work with you to identify and use all your available tax allowances and exemptions, and help you optimise your investment strategy.
To arrange an initial, no-obligation meeting to spring clean your finances, please contact us at hello@rpgcc.co.uk or call 020 7870 9050 to speak to us. You can also visit our web chat in the bottom right corner of our website, which we respond to personally during office hours. Please feel free to leave a message out of hours, and we’ll get back to you.
Remember, the RPGCC team is always just a click or call away.
Please note
Spring clean your finances is a article written for general information only and does not constitute advice. The information in this artcile, spring clean your finances, is aimed at retail clients only. All information is correct at the time of writing and is subject to change in the future. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning or estate planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
