With the end of the tax year approaching, now is a good time to check that you are making the most of your tax reliefs and allowances.
Income Tax
- Beat fiscal drag!
Consider transferring assets between spouses/civil partners if income tax savings could be made. - Think about increasing your pension savings before 5 April 2026, especially if your income is likely to be between £100,000 – £125,140 in 2025/26 as you could save tax at 60%. There are limits on the amount you can save in a pension each year tax, have you used all your pension reliefs in the previous three years?
- Dividend income tax rates increase by 2% on 6 April 2026 to 10.75% (for basic rate taxpayers) and 35.75% (for higher rate taxpayers). If you operate through your own company, have you considered advancing dividend payments before 6 April 2026?
- With the help of a financial adviser, consider subscribing for Enterprise Investment Scheme shares and investing in Venture Capital Trusts which attract 30% Income Tax (and, if conditions are met, other Tax Reliefs). Dividends from VCTs are free of Income Tax (up to £200k).
- Maximise your £20,000 ISA allowance for 2025/26.
If you are over 18 (but under 40), consider a Lifetime ISA to save for your first home or retirement. Save up to £4,000 each year, until you’re 50, and the government will add a 25% bonus to your savings (up to a maximum of £1,000 per year).
Capital Gains Tax
- Consider accelerating capital gains before 6 April 2026 if you haven’t used your £3,000 CGT annual exemption this tax year. If your spouse/civil partner hasn’t used theirs (and pays a lower rate of Income Tax), consider transferring assets you plan to sell to them.
- Don’t forget that CGT payable on capital gains qualifying for Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) are currently 14% but they increase to 18% on 6 April 2026 – are you able to accelerate your qualifying disposal?
Inheritance Tax
- With proposals to cap IHT reliefs, the nil-rate band remaining frozen at £325,000 until 2031, and the possibility that unspent pension savings may become subject to Inheritance Tax (IHT) from next April, the overall IHT exposure on your estate is likely to increase significantly.
Have you taken time to review what you’ll need in the long term and whether your gifts are being made tax‑efficiently?
- Think about gifting £3,000 of cash to use your £3,000 IHT before 5 April 2026. If you didn’t use this exemption in 2024/25, you can give £6,000 before 5 April 2026. Gifting assets may give rise to a CGT liability but that could be managed, depending on your circumstances.
- If you have spare income which you know you won’t need long term, have you considered giving it away on a regular basis?
- Have you considered making charitable gifts?
- Do the value of your business assets (to include shares in your trading company and/or potentially some qualifying investments) attract 100% IHT Agricultural Property Relief (APR) and/or Business Relief (BR)?
It is proposed that these reliefs will be subject to a £2.5m cap from 6 April 2026. Also, unused relief on the first death can be transferred to the surviving spouse/civil partner which means that potentially a combined £5m of qualifying agricultural and business assets could be transferred free of IHT.
Have you thought about accelerating gifts of your business assets/company shares before 5 April 2026?
As always, we are here to help steer you through – call one of our tax advisers on 01223 810100 for help and advice.
