Maximise Your Finances: 7 Key Steps for the New Tax Year
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only. You should always seek professional advice from an appropriately qualified adviser.
All contents are based on our understanding of current legislation, which is subject to change, any information provided here is only correct at the time of posting.
There is a risk to your capital and you may not get back the full amount invested. The value of investments, as well as the income from them, can fall as well as rise.
The start of a new financial tax year presents an excellent opportunity to review your finances, set new goals and take full advantage of available allowances and tax-efficient savings. Planning early can help you maximise returns, reduce tax liabilities and help ensure financial security for the year ahead. Below are seven key actions to consider at the beginning of the tax year.
1. Maximise Your ISA Allowance Early
Individual Savings Accounts (ISAs) remain one of the most tax-efficient ways to save and invest in the UK. For the 2025/26 tax year, the ISA allowance remains at £20,000.00. By investing early in the tax year, you benefit from a longer period of tax-free growth or interest accumulation.
Cash ISAs are suitable for those seeking a safe place for savings, while Stocks & Shares ISAs can offer higher growth potential over the long term, albeit with greater risk. If you are saving for a first home or retirement, considering a Lifetime ISA (LISA) could also be beneficial, offering a government bonus of 25% on contributions up to £4,000.00 per year subject to government legislation on property values at the time of purchase.
2. Review Your Pension Contributions
Pensions offer valuable tax relief on contributions, making them a crucial component of financial planning. In the 2025/26 tax year, the annual allowance for pension contributions remains at £60,000.00, subject to income limits and tapering for high earners.
Contributing early in the tax year allows investments more time to grow tax-free. Additionally, if you have unused allowances from the previous three years, you may be able to carry them forward to boost your pension pot. For higher-rate and additional-rate taxpayers, ensuring that pension contributions are maximised can provide substantial tax benefits.
3. Utilise Your Capital Gains Tax (CGT) Allowance
The annual exempt amount for Capital Gains Tax (CGT) has been significantly reduced in recent years, making tax planning even more crucial. For 2025/26, the CGT exemption is £3,000.00 for individuals. If you have investments or assets that may generate capital gains, planning sales throughout the tax year can help you manage tax liabilities.
Using ISAs or pensions for investments can help mitigate CGT exposure. Additionally, spouses or civil partners can transfer assets between each other tax-free, potentially doubling the CGT exemption and optimising tax efficiency.
4. Consider Gifting and Inheritance Tax Planning
Inheritance Tax (IHT) planning should not be left until later in life. The annual gift allowance allows individuals to give away up to £3,000.00 per tax-year without it being counted towards their estate for IHT purposes. If the previous year's allowance was unused, you can carry it forward, allowing you to gift up to £6,000.00 tax-free.
Other tax-efficient gifting strategies include making regular gifts out of surplus income, contributing to Junior ISAs for children or grandchildren, and utilising trusts for wealth transfer. Early planning ensures that more of your wealth goes to your loved ones.
5. Check for Tax Code Changes and Adjust Budgets Accordingly
At the start of the tax year, it is wise to check your tax code, which determines how much tax is deducted from your salary or pension. Errors in tax codes can lead to overpayments or unexpected tax bills.
Additionally, take note of any changes to personal allowances, National Insurance contributions or thresholds that may impact your take-home income. With the cost of living still a concern for many, reviewing your household budget and making necessary adjustments can help ensure financial stability.
6. Reassess Investments and Portfolio Allocations
Markets fluctuate, and economic conditions evolve, so reviewing your investment portfolio at the start of the tax year is a prudent move. Assess whether your asset allocation still aligns with your financial goals, risk tolerance and time horizon.
If your portfolio has drifted due to market movements, rebalancing may be necessary to maintain diversification. You may also consider whether tax-efficient investment options, such as Enterprise Investment Schemes (EIS) or Venture Capital Trusts (VCTs), align with your financial strategy, especially if seeking additional tax reliefs.
7. Review Your Protection and Emergency Fund
A comprehensive financial plan includes adequate protection against life’s uncertainties. Reviewing your life insurance, critical illness cover and income protection at the start of the tax year ensures that your policies still meet your needs, especially if circumstances have changed.
Furthermore, with rising inflation and cost-of-living concerns, ensuring you have a sufficient emergency fund is crucial. A general rule of thumb is to have six months’ worth of essential expenses saved in an easily accessible account to cover unexpected financial shocks.
Conclusion: The Importance of Financial Advice
The start of a new tax year is the perfect time to take proactive steps towards financial security. Whether it is maximising ISA and pension contributions, optimising tax allowances or reviewing your investment strategy, making informed decisions early can enhance long-term financial well-being.
Given the complexity of tax rules, investment choices and inheritance planning, seeking professional financial advice can provide clarity and ensure you are making the most of available opportunities. A qualified financial adviser can tailor recommendations to your personal circumstances, helping you navigate the tax landscape and achieve your financial goals efficiently.
Taking action now can set the foundation for a prosperous financial year ahead. Don’t leave it too late – start planning today.