Tax Rules

Is your money working as hard for you as it could? Maximise your tax savings before year end.

If you haven’t reviewed your personal tax situation recently, there is still time before the tax year ends on 5th April.

Regularly reviewing your finances can help you feel a greater sense of control in an increasingly uncertain world.  This period between the start of a new calendar year and the end of the current tax year is an ideal time to think about the tax efficiency of your financial arrangements. 

It’s a chance to make sure you are up-to-date with any changes in the law, and to make the most of the various allowances and reliefs available to you. 

Understanding your tax affairs is key to building your confidence in making financial decisions, maximising your wealth and setting you up for a secure financial future.

An experienced independent financial adviser (IFA) can help.

The tax landscape changes frequently, so it’s wise to keep up-to-date. As we near the end of the 2025/26 tax year, make sure you know how your income is taxed, and whether you can benefit from the multitude of potential reliefs and allowances. 

Marriage allowance 

This allowance provides an opportunity for couples where one partner is a basic rate taxpayer and the other partner’s income is below the personal allowance of £12,570.  With the Marriage Allowance, you can transfer up to £1,260 from the lower-income partner to the higher-income partner, saving up to £252 in the current tax year. This allowance is available to married couples and those in a registered civil partnership. 

Employee tax reliefs 

If you are employed, there are several tax reliefs you may be eligible to claim, designed to compensate for certain expenses you might incur in your job. 

• Professional subscriptions: Tax relief is available on fees paid to maintain membership of approved professional bodies.
• Working from home allowance: Relief for additional household costs incurred when working from home.
• Mileage allowance: Relief for business miles travelled in your personal vehicle, covering fuel and running costs.

Trading and property allowances 

These allowances are aimed at individuals who earn small amounts of income from activities like selling items online or renting out spaces, including:

• Trading allowance: Up to £1,000 tax-free income.
• Property allowance: Up to £1,000 tax-free income.
• Rent-a-Room relief: Up to £7,500 tax-free income from letting out a room in your home.

Individual savings account (ISA) allowance

The total annual ISA allowance remains at £20,000 and can be split across different types of ISAs (such as Cash or Stocks & Shares). Income and gains realised in an ISA are not subject to tax, meaning no income tax and no capital gains tax (CGT).

With a dividend allowance of only £500 and an annual exempt amount for CGT just £3,000, if you have yet to use your full ISA allowance for this tax year, you might want to consider a more tax-efficient approach. 

The 2025 Autumn Budget announced a consultation on future ISA rules likely to take effect from April 2027.  This includes a £12,000 restriction on the Cash element for under 65s and the Lifetime ISA (LISA) being scrapped entirely.

Junior ISA (JISA) allowance

You can also add up to £9,000 per annum to a Junior ISA (JISA) for your children, in addition to your own ISA, but proceed with caution because the money is legally theirs to spend as they wish from age 18.

Pension contributions 

Pension contributions should be a key consideration at the end of each tax year, if not before. Payments into pensions can also be made on behalf of your minor children and your grandchildren. 

• Contributions attract income tax relief at your marginal rate.
• Basic rate relief is applied automatically; higher/additional rate relief is claimed via Self Assessment.
• Employer contributions usually attract corporation tax relief.

‘Carry forward’ rules 

The ‘carry forward’ rules allow you to carry forward unused allowances from the previous three tax years, if eligible. When we reach the end of this tax year, you’ll lose any unused allowance from the 2022/23 tax year.  This is a highly complex subject so you should definitely speak to an accountant and/or IFA to get a clear idea of your specific situation.

Capital Gains Tax allowance 

As noted above, the annual exempt amount has been cut dramatically in recent years and is currently only £3,000. If you have already realised gains in 2025/26, or expect to do so before 6th April, we strongly recommend speaking to an expert! 

Dividend allowance 

The dividend allowance is now only £500. Dividends above this are still taxed at lower rates than other forms of income, but planning remains essential.

Gifting for estate planning 

Certain gifts can be exempt from inheritance tax (IHT), and therefore immediately outside of your estate, rather than subject to the well known ‘seven year rule’. These are commonly referred to as exempt gifts:

• Annual exemption: £3,000 per tax year (carry forward one year = £6,000).
• Small gift allowance: £250 per person per year.
• Marriage gifts: £5,000 (child), £2,500 (grandchild), £1,000 (others).
• Regular gifts from surplus income may qualify if certain requirements are met.
• Charitable and political donations are generally exempt.

Other available allowances 

Your Personal Savings Allowance (PSA) relates to interest earned on cash deposits and is currently set at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Additional rate taxpayers are not entitled to this allowance at all.

Understanding the exemptions and allowances that might suit your circumstances can mean you keep more of your income and capital gains, and potentially reduce the future IHT liability on your estate. 

If you’d like the help of an experienced IFA to review your tax position in time for the end of the 2025/26 tax year, you can find a Talis IFA here.

This article does not constitute tax or legal advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For guidance, seek professional advice. A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.