The 2025/26 tax year is drawing to a close, so now is the time to get in touch if you’d like to make last-minute use of your tax-efficient allowances.
This might include your pension Annual Allowance or final subscriptions to your ISAs.
While it’s important to make the most of these efficiencies (especially those that can’t be carried forward), it’s also important to think about how you’ll start the new financial year on the best possible footing.
Keep reading to find out the important April tax mistakes to avoid.
1. Failing to make the most of your Annual Allowance, or not knowing which allowance applies to you
As you are aware, your pensions are incredibly tax-efficient, so making the most of these efficiencies could prove valuable.
Tax relief is applied automatically at 20% to contributions up to 100% of your earnings, but you’ll need to factor it into the pension Annual Allowance too. For both 2025/26 and 2026/27, the Annual Allowance stands at £60,000. If you have time and liquid funds, consider topping up your pension now.
It’s important to note that as a higher or additional rate taxpayer, you can claim additional tax relief via self-assessment, so be sure to make the most of extra efficiency. Remember too that a different Annual Allowance might apply to you, and tax charges apply if you exceed it.
If you are a high earner, you might have triggered the Annual Allowance, which could reduce your annual allowance to as little as £10,000. Equally, if you have already flexibly accessed some of your pension funds, you might have triggered the Money Purchase Annual Allowance, which lowers your Annual Allowance to just £10,000. If you’re unsure which applies to you, get in touch.
Unused Annual Allowance can be carried forward for up to 12 months, so factor this into your budget for 2026/27. Regular contributions throughout the year not only save a last-minute panic but also allow you to drip-feed your investments to smooth out the impact of potential market volatility.
2. Not maximising your “use it or lose it” ISA Allowance, or that of your loved ones
As with your pensions, ISAs are tax-efficient. But unlike your pension, your ISA Allowance can’t be carried forward, so consider maximising its efficiency now if you can.
The ISA Allowance currently stands at £20,00 until at least April 2027 (after which some restrictions to Cash ISAs may apply, see below for more). There is no tax on interest earned in a Cash ISA, while Stocks and Shares ISA gains are free of Income Tax and Capital Gains Tax (CGT).
Making subscriptions throughout the year could save a panic this time next year and means the outgoings can be incorporated into your monthly budget, making them easier to find than a one-off lump sum. Early investment could also see improved returns.
Vanguard figures from April 2025 suggest that investing the full £20,000 at the start of the tax year (rather than the end) would see your ISA worth around £56,000 more after 25 years (£1,079,320 compared to £1,023,052 based on 5.5% annual growth with charges deducted).
Remember that if you hold a Junior ISA (JISA) or Lifetime ISA (LISA), these have their own limits – £9,000 and £4,000 respectively – but the same 5 April cut-off.
Both JISAs and LISAs are tax-efficient, so consider making top-ups to help out your loved ones this April.
3. Missing out on other valuable allowances
Several other tax-efficient allowances expire at the end of the tax year, and while some might have the option to carry unused allowance forward, others don’t. Here’s a brief rundown of some of the allowances you might consider using before the end of the tax year and at the start of the next.
- Capital Gains Tax Annual Exempt Amount – This stands at £3,000 for 2025/26 and 2026/27. You pay CGT on the profit you make when you sell certain assets, but only if that profit exceeds your Annual Exempt Amount. Timing asset disposals for either side of the tax year end could help to lower a potential bill.
- Dividend Allowance – You don’t pay tax on dividends within your Personal Allowance, but the Dividend Allowance adds an extra £500 to this amount; it can’t be carried forward, so use it now or lose it when the tax year ends.
- Annual gifting exemption – Gifting money to loved ones during your lifetime can be a tax-efficient way to pass on wealth. Each year, you can gift up to £3,000 tax-free, and the allowance can be carried forward for 12 months.
These are just a few of the allowances you might consider using before the current tax year ends and the new tax year begins.
For more information, read your guide to 7 key allowances you might want to use before the end of the 2025/26 tax year or speak to us now.
Get in touch
Please email hello@globeifa.co.uk or call us on 020 8891 0711 to discuss how Globe IFA’s expert financial advisors can help you manage your long-term financial plans.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
