Whether you're an employee, self-employed, or managing multiple income streams, being organised and making the most of your allowances and tax-efficient opportunities can help you build long-term financial security.
As the new tax year begins, now is the perfect time to take a step back and assess your finances. In this blog, George Square explains how to approach the 2025/26 tax year with confidence.
1. Make the most of your tax-free allowances
Understanding and using your tax-free allowances effectively in the 2025/26 tax year can make a significant difference to your overall financial position.
- Personal allowance: The personal allowance remains at £12,570, meaning you can earn up to this amount tax-free. For higher earners (those earning over £100,000), the personal allowance is gradually reduced by £1 for every £2 of income above this threshold. If you have multiple income sources, ensuring your tax code is correct can help avoid overpayment.
- ISA allowance: The annual ISA allowance provides a tax-free way to save or invest up to £20,000 (£9,000 for Junior ISAs). Using your allowance early in the year maximises the time your money has to grow.
- Dividend allowance: The dividend allowance has been reduced to £500. If you receive income from dividends, reviewing your income structure could help minimise unnecessary tax exposure.
2. Optimise your pension contributions
Pension contributions not only help you save for retirement but also offer valuable tax benefits. You can contribute up to £60,000 to your pension this year tax-free, although this may be tapered for those earning over £260,000. If you haven’t used your full pension allowance in the past three years, you may be able to “carry forward” any unused amounts, reducing taxable income in a high-earning year.
Those with access to employer contributions should also consider maximising these, as they can be a tax-efficient way to boost your retirement savings.
From 6 April 2027, unused pension funds could also form part of your estate and be subject to IHT – a departure from the current tax-free treatment for beneficiaries. Read our blog about how to prepare for these changes here.
3. Plan ahead for capital gains tax (CGT) changes
If you’re planning to sell investments, property, or other taxable assets, being aware of changes to CGT is essential in the 2025/26 tax year. The CGT annual exemption has dropped to £3,000, meaning gains above this amount could be taxable. However, if you’re married or in a civil partnership, transferring assets between partners before selling can effectively double your allowance and reduce tax liability.
Depending on your situation, it may be worth holding investments within ISAs or pensions to benefit from tax-free growth and minimise exposure to CGT. For advice tailored to your situation, please do get in touch.
4. Take a proactive approach to the year ahead
Good tax planning isn’t just about one-off decisions; it’s about making strategic moves throughout the year. With careful planning and the correct, professional advice, you can make the most of the opportunities available and set yourself up for a financially secure future.
If you'd like to discuss your options in more detail, please get in touch with an independent financial adviser at George Square today.