Tax Year End Checklist: Seven actions for DIY investors to take now before allowances reset at midnight on April 5

Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, the DIY investment platform and coaching service, comments:       

The end of the 2025-26 tax year at midnight on April 5 is approaching fast and at a time when tax efficiency has rarely mattered more, savers and investors should ensure they do not miss out on valuable tax-free allowances.   

The UK has been hit with a series of tax changes in recent years, that will significantly increase personal tax burdens and erode disposable incomes – making the case for tax-efficient saving and investing even more compelling. Chancellor Rachel Reeves’ decision in the recent Autumn Budget to extend the freeze on income tax thresholds until April 2031 will gradually drag millions more people into higher tax bands as wages rise. The Budget also set out 2-percentage point increases in tax rates on dividends from April 2026, and on savings interest and property rental income from April 2027. 

Meanwhile, in October 2024, investors were hit with hikes to Capital Gains Tax (CGT) rates – to 24% for higher rate taxpayers and 18% for basic rate taxpayers – piling further pressure on those already affected by major cuts to both the CGT annual exemption and the Dividend Allowance under the previous Conservative Government. 

There are also future tax changes for pensions to consider, including the decision to bring unspent pension assets within the scope of Inheritance Tax from April 2027, alongside a new cap on the Cash ISA allowance at £12,000 for those aged under 65 from the same date. And with no change to the Personal Savings Allowance since its introduction in 2016, more people are now paying tax on the interest earned on their cash savings.  

With so many tax changes to weigh up, getting your financial house in order – and maximising allowances while they remain in their current form - is essential for anyone looking to mitigate their rising tax burden.   

Remember, some allowances can be carried forward to the next tax year, but most cannot, so it really can be a case of ‘use it or lose it’.  With the clock ticking down towards the annual reset at midnight on April 5, here is a checklist of seven actions to take now to ensure your savings and investments are as tax efficient as possible:  

Savers and investors can shelter up to £20,000 in an Individual Savings Account (ISA) this tax year - whether in cash or investments, but the allowance resets on April 6 and cannot be backdated.  ISAs remain one of the most attractive tax-efficient wrappers available, as all income and capital gains generated inside the account are completely tax-free. This allows savers to grow their wealth and withdraw investments whenever they choose without incurring a tax bill.     

While the rules governing cash savings in ISAs are set to change from April 2027, it’s important to remember that subscriptions made this financial year (2025-26) or next (2026-27) fall under the current framework. When the new rules take effect, Cash ISA contributions for adults aged under 65 will be capped at £12,000 a year, with further measures planned to discourage people from holding cash balances inside Stocks & Shares ISAs - though the final details on the latter are yet to be confirmed. Even under the future regime, investors will still be able to access the full £20,000 allowance each year, though they may need to be more mindful of how much cash they hold in their Stocks & Shares ISA, depending on what rules come into force.  

For now, however, the message is simple: 'use it or lose it’. Savers can subscribe up to £20,000 to an ISA this tax year – either in cash or investments or a combination of both. So, rather than worrying about future tweaks, the priority should be making optimal use of this year’s allowance – and next year’s - to ensure income and gains are shielded from tax, not just this financial year but over the long term. 

ISAs offer several helpful flexibilities. These include the ability to make withdrawals without losing this year’s allowance. For example, someone who withdrew £5,000 earlier in the tax year can replace that sum before April 5 – in addition to their £20,000 allowance – giving them the opportunity to top up their account with £25,000 by tax year end. Note, however, not all ISA providers facilitate flexible withdrawals.  

To make the most of this tax year’s £20,000 ISA allowance, simply open a new ISA or top up an existing account with as much as you can afford. Cash ISAs might work well for short-term savings goals, but investment ISAs are better suited to long-term savings goals with a time horizon of five years or more – that gives investors time to ride out short-term periods of volatility in the financial markets.  

Be aware: Don’t panic if you need more time to choose your investments. This financial year, you can still secure your tax-free allowance by funding an investment ISA with cash and then drip feeding the money into the markets when you are ready – even if that is next tax year. Some platforms, such as Bestinvest, provide interest payments on cash balances (Bestinvest currently pays 2.98% on cash held), meaning your money won’t sit idle while you take more time to make your investment decisions. 

Saving into a pension not only boosts your future retirement income but can also reduce your income tax bill today as contributions attract tax relief at your marginal rate. Basic rate taxpayers receive 20% tax relief, while those paying higher-rate (40%) or additional-rate (45%) can claim a further 20% and 25% respectively, typically through their Self-Assessment tax return. This means a £1,000 gross contribution costs a basic-rate taxpayer £800 after tax relief. For a higher rate taxpayer, the net cost is £600 while for an additional-rate taxpayer the net cost falls to £550.  

This still makes pensions the most effective way to save for retirement, a point that matters even more given the extended freeze on income tax thresholds until 2031.There is always the risk that the Government takes another look at pension tax relief, raising the case once again for contributing while the current, generous, system remains in place. 

Maximising contributions can be especially beneficial for those caught in the earnings band between £100,000 and £125,140, where the tapering away of the Personal Allowance results in an effective tax rate of over 60%. Pension contributions can help restore lost allowances and reduce the tax bill – a strategy that can also be effective for those about to tip into the higher rate of tax for the first time. 

For most people, the maximum you can pay into a pension this tax year is the lower of £60,000 gross or 100% of your qualifying earnings (typically employment income as opposed to pension or property rental income). The Annual Allowance encompasses all contributions across all pension arrangements made by you, your employer, and the Government via tax relief. Very high earners, however – those with an adjusted annual income above £260,000 – are subject to a tapered allowance which gradually reduces the amount of tax-relievable contributions they can make to as little as £10,000.   

Once the money is paid into a pension, it cannot typically be accessed until the age of 55, or 57 from 2028.  Plus, exceed your Annual Allowance and you may incur an additional tax charge, so careful planning is essential.  

Pensions also benefit from ‘carry forward’ rules, allowing savers to utilise unused annual allowances from the previous three tax years, provided they max out the current year’s allowance. This can help those receiving a large bonus or windfall to park their money in a tax-efficient space. It means a saver could potentially make a gross pension contribution of up to £220,000 before April 5. That total reflects an annual allowance of £60,000 this tax year – and in 2024-25 and 2023-24 – and the £40,000 for 2022-23. 

Take note: To make use of ‘carry forward’, you must first contribute up to your full pension allowance for the current tax year. You must also have been a member of a UK-registered pension scheme in each of the three previous tax years, although you did not need to have made contributions during those years. Once you have used this tax year’s full allowance, carry forward rules apply on a first-in-first-out basis, meaning the oldest of the previous three years’ unused allowance is used first. In this tax year, that would be 2022-23. However, to receive tax relief on contributions you personally make, the amount you pay for each of the earlier tax years cannot exceed your earnings from that year. For example, if you earned £35,000 in 2022-23, then your gross contributions cannot exceed that level. 

If you are worried that a forthcoming pay rise or bonus might push your income into a higher tax band, it may be worth asking your employer about ‘salary sacrifice’, especially as the rules around this valuable benefit are set to change in the coming years. 

The Autumn Budget announcement to cap the amount of salary that workers can sacrifice into a workplace pension at £2,000 was a blow for pension savers, but crucially this change does not come into force until April 2029. That gives employees just over three years to make full use of the tax perks salary sacrifice offers before the opportunity narrows.  

Salary sacrifice is a popular feature of many workplace schemes because it allows employees to exchange part of their salary or bonus for an equivalent pension contribution. This not only reduces income tax, but also lowers National Insurance contributions (NICs), for both the employee and employer, making pension saving even more tax efficient.   

Of course, not every employer offers salary sacrifice, but if yours does, now may be an ideal time to increase contributions – assuming you can afford to. Salary sacrifice can be particularly beneficial for those nearing crucial tax cliff edges where an individual’s marginal rate can jump dramatically.  

This includes employees close to the £50,270 earnings threshold where the higher-rate 40% income tax band begins, those nearing the £100,000 threshold at risk of hitting the 62% tax trap, or those at risk of losing out on child benefit because their salary is too high. Salary sacrifice can reduce taxable income below these key thresholds, restore lost allowances, and cut an individual’s tax bill. 

Take note: Salary sacrifice may give your pension a healthy boost, but agreeing to a lower salary could impact your ability to access credit, such as a mortgage, as you will have a lower headline income. Employee benefits such as life cover, holiday, sickness and maternity pay may also be affected, so request a personalised calculation of how the scheme will affect your take-home pay, pension contributions and benefits before committing. 

Not everyone has spare cash to contribute to an ISA or pension, but many do hold assets, such as shares or funds, outside a tax wrapper that would benefit from being sheltered from future tax charges. 

With the annual allowance for tax-free dividends slashed to just £500 at the start of the 2024-25 tax year - just 10% of the £5,000 available as recently as 2017-18 tax year - and the annual Capital Gains Tax (CGT) exemption cut to £3,000, down from £12,300 it was in the 2022-23, shifting investments into a tax-protected ISA or pension is becoming increasingly attractive.  

To do this, investors can sell shares or funds using their existing CGT exemption and repurchase them within an ISA – a process known as ‘Bed and ISA’ – to keep future returns out of the reach of tax charges. A similar process, Bed & Pension, applies to investments moved into a pension, such as Self-Invested Personal Pension (SIPP).   

While you may incur CGT on any profits above your annual allowance when you sell the investments, moving the money into an ISA or pension ensures you won’t have to in the future – a benefit that will grow even more valuable as allowances remain frozen.  

Take note: There is a limited time window to complete these transactions, as providers set early Bed & ISA and Bed & Pension deadlines to ensure sales and transfers are processed before tax year end.  

As personal tax allowances come under increasing pressure, married couples and civil partners have a handy tax advantage over their unmarried peers - the opportunity to make ‘interspousal transfers’ where savings and investments can be switched between spouses without triggering a tax event. This enables couples to maximise two sets of allowances and ensure assets liable for tax are held by the partner subject to lower rates of tax.     

As people face the reality of a much heavier personal tax burden, married couples can make full use of two sets of personal savings allowance, dividend allowance and capital gains exemptions to reduce the overall amount of tax exposure for the family.      

Remember, couples can also double up on their ISA allowances, so there is potential for a couple to stash £40,000 this tax year and a further £40,000 next. 

Before transferring shares, funds or cash to your other half, remember they become the full, legal owner of the assets, so this is an unwise move if the relationship is not on stable ground.    

Take note: Some couples can also ease their tax burden by claiming marriage allowance, where a lower-earning partner – typically with an income below the Personal Allowance of £12,570 – to transfer up to £1,260 in the 2024-25 tax year to the higher-earning partner, which can reduce their tax bill by up to £252. This is because the basic-rate taxpayer would normally be charged 20% income tax on that portion of their salary, so 20% of £1,260 is £252. There is also the option to reclaim the marriage allowance for the four previous tax years – provided they are eligible to backdate – providing an additional saving of over £1,000.  Note, however, this is only available for couples where neither pay the higher rate of tax.      

Children typically don’t pay tax, unless they have sizeable earnings, but they still have tax allowances that can be useful for parents and grandparents that want to build tax-efficient saving and investments for their future. The first of these is their Junior ISA allowance, which is capped at £9,000 this financial year.    

The tax benefits mirror those of an adult ISA – with no capital gains or income tax to pay. Funds become accessible once the child turns 18 at which point the pot effectively converts into an adult ISA. That makes JISAs useful to cover future costs such as university fees, a gap year or a first-home deposit. Don’t forget that only the child can access the money at 18, so families should consider the implications of this when contributing – particularly if a child has different financial goals to their parents. 

While a parent or guardian must open the account, anyone can contribute – even the child themselves, provided they have a UK bank account. This makes a JISA a great vehicle for generous relatives to support a child’s financial future and for children to save towards their own financial goals. Just remember, once the money has been subscribed to a JISA, it cannot be accessed until the child turns 18. 

Parents can either choose to open a Cash JISA or Stocks & Shares JISA depending on their time horizon and attitude to risk. While a Cash JISA might work well for short-term goals, a Stocks & Shares JISA may be more suitable for those long-term financial targets, particularly if a parent opens the account when the child is young. A timeframe of more than five years leaves enough room for investments to ride out shorter periods of market volatility – and deliver preferential returns over cash over the long term.

One additional advantage is that JISAs sidestep the parental tax rules. If a child earns more than £100 in interest on money gifted by a parent and held in a regular savings account, that income is taxed as if it were the parent’s - an issue that does not apply to JISAs. Parents should tread carefully, however. There’s no point topping up a JISA if they might require the money for their own needs, because they can’t get it back.

Take note: Don’t forget, non-taxpayers, including children, can open a pension and still receive basic rate tax relief - though the ceiling on the annual gross pension allowance is lower at £3,600. This means a parent or grandparent could subscribe up to £2,880 into a pension for a child, with the sum then topped by up by £720 from the government.   

It might not be something a child thanks you for now, but a sum of £2,880 invested every year in a child’s SIPP, topped up with government tax relief of £12,960 over 18 years, would mean total contributions of £64,800. Were those contributions to grow by an annual compound growth rate of 5%, then in their 18^th year the pension would be worth just over £107,000. Even if no further contributions were ever made after this age, the pension would tip over £1 million by the age of 63, just in time for retirement, based on a 5% growth rate, compounding monthly.   

Those that can afford to give money away to family members or friends can take advantage of exemptions so that the gift does not form part of their estate for Inheritance Tax purposes when they die, landing the beneficiaries with a tax bill.   

This may make even more sense now that unused defined contribution pension pots will be subject to inheritance tax at the death of the holder from April 2027. Extending IHT to cover pension assets has seen more retirees reconsider how they access their pension pots, with many either choosing to spend the money or gift it rather than preserve it.   

This tax year, and next, however, the existing IHT allowances still applies. This includes a nil rate band of £325,000 and an additional £175,000 residence nil rate band available where a main residence is left to direct descendants, and the total value of an estate falls below £2 million.    

 A cushion of up to £500,000 per person, or £1 million for a couple, might sound generous, but increasing numbers of estates are becoming subject to IHT as property and share prices continue to rise. In addition, IHT allowances will remain frozen until 2031 after the Chancellor extended the freeze by a year at the recent Budget, just 12 months after extending it by two years. 

While a financial gift to children and grandchildren can be an effective way to reduce an IHT liability for those at risk of breaching their nil rate bands, if the giver does not live more than seven years after making the gift, the estate or even the recipient of the gift themselves might have to pay IHT.    

Sums that fall outside the IHT exemption level currently attract a 40% tax-charge payable by the deceased’s beneficiaries. And with pensions coming under the scope of IHT from April 2027, it means even more people could find themselves facing a hefty tax bill.   

Take note: Thankfully, exemptions outside the seven-year rule continue to enable people to make financial gifts without triggering an IHT bill.

These include:  

£3,000 rule: Up to £3,000 can be given away every year tax-free. This allowance can be carried forward for one tax-year, meaning you could gift up to £6,000 in a lump sum free from future IHT liabilities. For couples, those figures double, with up to £6,000 per couple per tax year and up to £12,000 if the allowance is carried forward for a year.     

Small gift allowance rule: You can make multiple cash sums of up to £250 per recipient without affecting an individual’s IHT liability.    

Gifts from surplus income rule: You can give away unlimited amounts provided the money comes from your regular income - such as employment or pension income rather than capital – and does not diminish the giver’s standard of living in any way. Effectively, it must be affordable after covering normal outgoings.      

The wedding gift rule: Parents can give £5,000 to a child, while grandparents can gift £2,500 to a grandchild or great grandchild to help cover wedding expenses.