Five year-end tax planning tips

As the end of the 2025/26 tax year approaches, it is a good idea to undertake a financial review and assess whether there is any action you can take to cut your tax bill.

Tip 1 – Don’t waste your personal allowance

If you have not used your 2025/26 personal allowance, it will be lost – you cannot carry it forward to 2026/27. To prevent wasting it, consider whether you can advance income so that you receive it in 2025/26 rather than in 2026/27. If you are claiming capital allowances, consider tailoring your allowances so you do not waste your personal allowance. If you have a family company, consider paying a dividend to mop up your dividend allowance and any unused personal allowance.

If you cannot use your personal allowance and you are married or in a civil partnership and your spouse/civil partner pays tax at the basic rate, consider making a marriage allowance claim to transfer £1,260 of your allowance to them – this can cut your joint tax bill by £252.

Tip 2 – Reduce your income to protect your personal allowance

Once adjusted net income reaches £100,000, your personal allowance is reduced by £1 for every £2 by which your income exceeds this level. Once adjusted net income reaches £125,140, the personal allowance is lost. However, consideration could be given to making pension contributions or Gift Aid donations to charity to reduce your income and claw back some or all of your personal allowance.

Tip 3 – Invest in an ISA

If you have not already invested the full £20,000 in an ISA in 2025/26, consider using the full allowance before 6 April 2026. Interest and dividends within an ISA are tax-free.

From 6 April 2027, the tax rates on savings income will rise by two percentage points. From the same date, under 65s will only be able to invest £12,000 of their £20,000 ISA allowance in a cash ISA.

Tip 4 – Beat the dividend tax rise

From 6 April 2026, the dividend ordinary rate (which applies to dividends falling in the basic rate band) and the dividend upper rate (which applies to dividends falling in the higher rate band) increase by two percentage points. The dividend ordinary rate rises from 8.75% to 10.75% and the dividend upper rate rises from 33.75% to 35.75%. There is no change in the dividend additional rate which remains at 39.35%.

If you have a personal or family company which has retained profits, consider paying a dividend before 6 April 2026 to beat the dividend tax rises.

Tip 5 – Make pension contributions

Tax-relieved contributions can be made to a registered pension scheme up to 100% of earnings (or £3,600 if lower) subject to having sufficient available annual allowance. The annual allowance is set at £60,000 for 2025/26. However, where threshold income exceeds £200,000 and adjusted net income exceeds £260,000, it is reduced by £1 for every £2 by which adjusted net income is more than £260,000 until the allowance is reduced to £10,000. Unused allowances can be carried forward for up to three years. Any allowance from 2022/23 will be lost if not used by 5 April 2026; however, you must use up all your 2025/26 allowance before using allowances from earlier years.

Once a pension has been flexibly accessed, the annual allowance is reduced to £10,000.

Partner note: ITA 2007, Pt. 2; FA 2004, ss. 228, 228ZA.

Disclaimer

This article is not intended to be tax advice. Each person's tax circumstances are different; therefore, we recommend that you contact us for personalized tax advice. Sam Niranjan & Co., or Sivasambu Candesamy Niranjan, will not accept any responsibility whatsoever if you make any loss as a result of relying on this article.