Take simple steps to maximise your allowances

T ravel Weekly is extending its personal and business information content by teaming up with financial advisor David Croft for a regular column offering answers to readers’ questions about personal finance. In this column, David, who previously worked in the travel industry, explains why the end of the tax year matters.

 

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The end of the tax year is approaching and it might matter more than you think. This applies if you have savings, investments, a pension, dividends, a buy-to-let/second home, or you regularly help family financially. Small tweaks can make a big difference. 

The UK tax year runs from April 6 to April 5. When it ends, many allowances reset and if you don’t use them, you usually can’t backdate them later.

 

Your key annual allowances

Here is a rundown of your key annual allowances and why they matter:

 

ISA allowance

 

You can put up to £20,000 into ISAs each tax year (cash and/or investments), offering protection from tax on interest, dividends and growth. It’s a case of ‘use it or lose it’ as unused allowance doesn’t roll over. 

Pension annual allowance

 

This is the limit on how much can go into pensions each tax year with tax relief. The standard allowance for 2025-26 is £60,000, but it can lower in certain situations. If you’re close to the higher-rate tax band, pension contributions can be one of the easiest ways to reduce tax, because part of what would have gone to HMRC can end up boosting your pension instead. The allowance can reduce for very high earners due to tapering.

Dividend allowance

 

You can receive £500 of dividends tax-free outside ISAs/pensions. If you hold shares outside wrappers, or you’re paid partly via dividends as a limited company owner, that £500 often doesn’t go far. After that, dividend tax can apply depending on your income tax band.

Capital Gains Tax (CGT) annual exemption

 

CGT is tax on the profit you make when you sell something that’s gone up in value – typically shares held outside an ISA, or property that isn’t your main home. In 2025-26 you can make £3,000 of gains CGT-free.

Personal Savings Allowance (PSA)

 

This is a tax-free buffer for interest you earn on savings. The limits are £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers, and £0 for additional-rate taxpayers. Interest above your allowance is usually taxed based on your tax band (typically 20%, 40% or 45%). With improved savings rates over the last 10 years, more people are finding some of their savings interest is taxable, particularly higher-rate taxpayers that have a solid emergency fund.

Inheritance Tax (IHT) gifting allowance

 

You can gift up to £3,000 each tax year and it’s immediately outside your estate for IHT. If you didn’t use last year’s £3,000, you can carry one year forward.

What’s about to change

From the 2026/27 tax year, dividend tax rates will increase by two percentage points:

• Basic rate 8.75% → 10.75%
• Higher rate 33.75% → 35.75%
• Additional rate stays at 39.35%

For limited company owners, if you take dividends, this is a real cost increase to factor in from April 6.

 

10-minute check-up

• Check how much of your £20,000 ISA allowance you’ve used.
• If you take dividends, factor in the dividend tax rise from April 6.
• If you have investments outside ISA or pension wrappers, review whether using your £3,000 CGT allowance is sensible.
• If cash interest is creeping up, keep an eye on your Personal Savings Allowance.
• If you’re a higher earner or you’ve had a great year, check your pension annual allowance position.
• If you support family financially, consider use of the £3,000 gifting exemption and keep track.

 

This article is for guidance only and not personal financial advice. The levels and bases of taxation and reliefs can change at any time. Tax relief is dependent on individual circumstances. The value of an investment with St. James’s Place may fall as well as rise. You may get back less than the amount invested.