Take advantage of the new tax year

Make the most of tax-free ISA allowances

Individual Savings Accounts (ISAs) are an excellent way to save and invest tax-efficiently. The ISA allowance for the new tax year
(6 April to 5 April) is £20,000. You can invest in a stocks and shares ISA, a cash ISA, or both, providing the total amount doesn’t exceed the annual £20,000 allowance. Of course, any money invested in a stocks and shares ISA should be money that you don’t need in the short term, typically the next five years. The value of your stocks and shares ISA can go down as well as up so you might get back less than you put in.

Putting money aside tax-efficiently in an ISA, is an easy way to make it work that bit harder as you won’t pay income tax or capital gains tax on any income.

Consider topping up your pension

Take advantage of the £60,000 annual allowance for pension contributions.

Your annual allowance is the most you can save in your pension pots in a tax year before you have to pay tax. You’ll only pay tax if you go above the annual allowance which is £60,000 this tax year, or 100% of your income if you earn less than £60,000.

Given the income tax relief you get on the money you save into your pension, it provides one of the best ways to save for your retirement. Topping up your pension can result in a higher income when you retire. Remember, the value of your investment can go down as well as up so you might get back less than you put in.

Proposed change to pensions from April 2027

The Chancellor announced in the Autumn Budget 2024 that most unspent pensions will be included as part of an estate for inheritance tax purposes, from April 2027. This change is significant as up till now it’s been possible to pass on personal pensions free from inheritance tax. The change is currently under technical consultation by the government, which at the time of writing, we are awaiting an update on.

Check your savings are working effectively for you

Double check your savings are earning as much interest as possible across both variable and fixed-term savings accounts.

Your personal savings allowance depends on your income tax band. Basic rate taxpayers can earn £1,000 of interest on their savings, whilst higher rate taxpayers can only earn £500 before paying tax. If you’re approaching the threshold you might want to consider moving some savings into an ISA – where you won’t pay income tax or capital gains tax on any interest earned.

Minimise your inheritance tax liability

If you’re looking to minimise an inheritance tax liability, you could consider giving some gifts to help your loved ones.

It’s sensible to make the most of your gifting allowance each year – as cash gifts won’t be included in your estate and eligible for inheritance tax.

You can gift £3,000 tax free per year. Or £6,000 in total, as a couple. And if you haven’t used last year’s gifting allowance you can gift £6,000 or £12,000 as a couple (carrying forward last year’s unused allowance).

You can also give small gifts up to £250 to as many people as you like each tax year, but not if they’ve received the £3,000 annual exemption. You may give wedding gifts of up to £5,000 for children, £2,500 for grandchildren or great-grandchildren and £1,000 for anyone else, but you will need to gift this before the wedding. Gifts also include donations to charities like museums, universities or community amateur sports clubs, and political parties.

Don’t forget your marriage allowance

If you’re married, or in a civil partnership, and one of you is earning below the personal allowance (£12,570) you can consider applying for the marriage allowance. This allows the lower-earning partner to transfer £1,260 of their personal allowance to the higher earner, saving up to £252 in tax. It can only be transferred to the person if they pay income tax at the basic rate, which usually means their income is between £12,571 and £50,270 before they receive marriage allowance.

If you’re in Scotland, your partner must pay the starter, basic or intermediate rate, which usually means their income is between £12,571 and £43,662.

Here to help

This information is based on our current understanding of taxation law and practice in the UK. Tax rules can change and the impact of taxation, and any tax relief, depends on your personal circumstances and where you live.

Preparing effectively for a new tax year involves careful planning and strategic use of allowances and exemptions. By using your ISA allowances, maximising your pension contributions, ensuring your savings are working as hard as possible, making use of gift allowances, and the marriage allowance, you may optimise your financial position and minimise your tax liabilities. Why not speak to a financial adviser for some help to maximise your allowances and reduce the tax you may need to pay.