A practical guide to making the most of your personal allowances before the tax year ends.
As we approach the end of the 2025/26 tax year, there is a simple thing worth remembering.
Most allowances reset on 6 April.
If they are not used by 5 April, they are gone.
Year-end tax planning is not about complex structures or aggressive strategies. It is about making sure the allowances already available to you are doing their job.
Here is where to focus.
Protect Your Personal Allowance
The standard Personal Allowance is £12,570. However, once income exceeds £100,000, the allowance is reduced by £1 for every £2 of additional income. By £125,140 it is fully withdrawn, creating an effective 60 percent marginal rate for many individuals.
If your income falls between £100,000 and £125,140, this is one of the most valuable planning windows in the tax system.
Two of the most effective tools are:
- Pension contributions
- Gift Aid donations
Both reduce adjusted net income. In the right circumstances, they can restore part or all of your Personal Allowance and reduce exposure to higher marginal rates.
Use Both Spouses’ Allowances
Married couples and civil partners often overlook straightforward household planning opportunities.
Each individual has:
- Their own £12,570 Personal Allowance
- Their own £3,000 Capital Gains Tax annual exemption
- Their own £20,000 ISA allowance
Do Not Overlook the Smaller Reliefs
Several smaller allowances are often missed:
- £1,000 trading allowance
- £1,000 property allowance
- Marriage Allowance where one spouse is a basic rate taxpayer
Individually, these may seem modest. Over time, they add up.
ISA Allowances: A Simple, Effective Step
The ISA allowance is £20,000 per adult for the current tax year.
Interest, dividends and gains generated inside an ISA are generally free from UK Income Tax and Capital Gains Tax.
If you do not use your allowance by 5 April, it does not carry forward. Also, from 2027 the Cash ISA allowance will reduce to £12,000.
Junior ISAs allow up to £9,000 per child, providing a tax-efficient wrapper for long-term savings.
For higher earners who are facing reduced savings allowances or increased dividend rates, ISA funding is often one of the cleanest and lowest-risk actions available before year-end.
Pension Contributions: Immediate and Long-Term Benefit
The standard annual pension allowance is £60,000.
Unused allowances from the previous three tax years may be carried forward if you were a member of a pension scheme, allowing for larger contributions where appropriate.
Pension contributions can:
- Reduce higher and additional rate Income Tax
- Help avoid the 60 percent marginal band
- Reduce exposure to the High Income Child Benefit Charge
- Strengthen long-term retirement planning
Timing is critical.
For business owners, employer pension contributions can be particularly efficient as they may reduce corporation tax while minimising employee National Insurance.
Capital Gains Tax: Use the Annual Exemption
The Capital Gains Tax annual exemption is currently £3,000 per individual.
If you are holding investments with unrealised gains, it may be worth considering whether to:
- Crystallise gains up to the exemption
- Transfer assets to a spouse before disposal
- Offset capital losses
Where gains arise on UK residential property, reporting and payment are generally due within 60 days of completion.
Leaving disposals until after 5 April removes flexibility.
Inheritance Tax: Make Use of Gifting Allowances
Inheritance Tax thresholds remain frozen, which increases long-term exposure for many families.
However, annual exemptions remain available:
- £3,000 per tax year
- An additional £3,000 if last year’s exemption was unused
- Unlimited small gifts of £250 per person
- Regular gifts out of surplus income where structured correctly
- Gifts for weddings or civil partnerships (amount dependent upon your relationship to the person getting married or starting a civil partnership).
These allowances reset on 6 April. Used consistently, they can gradually move meaningful value outside your estate.
The Bigger Picture
Year-end planning is rarely about one dramatic decision.
It is usually about layering:
- ISA funding
- Pension optimisation
- Income balancing
- Spousal planning
- Timed disposals
When allowances are coordinated properly, the combined impact is significant.
When they are ignored, the opportunity simply disappears on 5 April.
Final Thought
A quote from our Principal, Sunil Aggarwal:
Every year, I see clients focus on earning more but overlook the allowances they already have. Before 5 April, the real question isn’t whether you need a complex strategy: it’s whether your existing allowances are working as hard as they should be. Used properly, they protect income, reduce exposure to higher marginal rates and strengthen long term wealth. Ignored, they simply expire. Good planning is rarely dramatic, it is deliberate, resilient and strategic.
If you would like a structured year-end review to make sure nothing is being left unused, we would be pleased to discuss your position.
You can:
- Email: info@drs-tax.com
- Telephone: 020 8059 1891
- Submit an enquiry via our Contact Us page
You can also book a free 15-minute consultation to review your position and next steps.