As the end of the tax year approaches, it offers a valuable opportunity to pause and take stock of your financial position. With the 5 April deadline in sight, now is the time to ensure you have made full use of the allowances and reliefs available to you.
These allowances exist to support your long-term financial wellbeing. Used thoughtfully, they can reduce your tax liability, strengthen your investment strategy, and bring you closer to your wider goals. Left unused, they may be lost once the new tax year begins.
Below are some of the key areas worth reviewing.
1. ISA allowance
Every individual has an annual ISA allowance – currently £20,000. Contributions to ISAs grow free from Income Tax and Capital Gains Tax, creating a powerful, tax-efficient environment for your savings and investments.
If you have not yet used your full allowance, consider whether additional contributions would support your medium and long-term plans. Over time, consistently using your ISA allowance can significantly enhance the tax efficiency of your portfolio.
2. Pension contributions
Pensions remain one of the most effective ways to build long-term wealth. Contributions typically benefit from tax relief at your highest marginal rate, and investments grow free from Capital Gains Tax and Income Tax within the pension wrapper.
The annual allowance is £60,000 for most individuals, though this can vary depending on income and previous contributions. If you have unused allowance from the past three tax years, you may be able to carry it forward – an opportunity that can be particularly valuable for higher earners or those who have experienced fluctuating income.
Ensuring pension contributions are aligned with both your retirement goals and your wider tax planning strategy can make a meaningful difference over time.
3. Capital gains tax allowance
Each individual has an annual Capital Gains Tax exemption – currently £3,000. If you are holding investments outside tax-efficient wrappers, it may be worth reviewing whether realising gains within this allowance would be beneficial.
A carefully planned approach can help you gradually reposition assets into ISAs or pensions, improving tax efficiency without disrupting your overall investment strategy.
4. Dividend allowance
For those receiving income from investments or company shares, the dividend allowance – currently £500 – may also warrant attention. Ensuring your dividend income is structured tax-efficiently can help preserve more of your returns.
5. Gifting and estate planning
The tax year end is also an appropriate time to consider your estate planning strategy. The annual gifting allowance allows you to give away up to £3,000 each tax year without it forming part of your estate for Inheritance Tax purposes. Unused allowance from the previous year can also be carried forward for one year.
Thoughtful gifting can support loved ones while gradually reducing the potential future Inheritance Tax liability on your estate.
A joined-up approach matters
Tax planning should never be done in isolation. The right course of action depends on your income, existing assets, family circumstances, and long-term objectives. What is appropriate for one individual may not be right for another.
With the deadline approaching, now is an ideal time to review your position and ensure your allowances are working as effectively as possible for you. Even small, well-timed decisions can create meaningful long-term advantages.
At Fogwill & Jones, we believe tax planning is not about reacting at the last minute. It is about building a clear, considered strategy that supports your broader financial ambitions.
If you would value a conversation about how best to use your allowances before the tax year ends, we would be pleased to help you plan with clarity and confidence.
Andrew Ball
Chartered Financial Planner