Introduction

As the end of the tax year approaches, it is important to review your financial affairs and ensure you are making full use of the tax reliefs and allowances available to you.

Many tax planning opportunities must be implemented before 5 April 2026. Once the tax year ends, these opportunities may be lost permanently and cannot usually be carried forward to future years.

This guide highlights the most effective tax planning opportunities available to individuals, business owners and property investors before the end of the 2025/26 tax year.

Click here for our Top 25 Tax Planning Ideas Before 5 April 2026

Income Tax Planning

The personal allowance for the 2025/26 tax year remains £12,570. However, this allowance begins to reduce when income exceeds £100,000.

For every £2 of income above £100,000, £1 of personal allowance is lost. As a result, individuals earning between £100,000 and £125,140 face an effective marginal tax rate of 60%.

This is often referred to as the ‘60% tax trap’.

Example:

An individual earning £110,000 would lose £5,000 of their personal allowance. This effectively increases the amount of income subject to higher rate tax.

If the individual instead makes a pension contribution of £10,000, their adjusted income may fall below £100,000. This could restore their full personal allowance and significantly reduce their tax liability.

Common strategies to manage taxable income include:

• Pension contributions
• Gift Aid donations
• Salary sacrifice arrangements
• Income splitting between spouses
• Timing dividends or bonuses

Pension Planning

Pensions remain one of the most tax-efficient planning tools available.

Most individuals can contribute up to £60,000 per year into a pension. Contributions receive tax relief at the individual’s marginal tax rate.

For example, a higher rate taxpayer contributing £10,000 may receive £4,000 of tax relief. This means the effective cost of the contribution may only be £6,000.

Employer pension contributions made by a limited company can be particularly tax efficient.

Example:

A company contributing £20,000 into a director’s pension may receive corporation tax relief on the contribution. The director also receives the pension contribution without paying income tax or National Insurance on the amount contributed.

Capital Gains Tax Planning

The Capital Gains Tax annual exemption is £3,000 per individual.

This means gains up to this amount can be realised without paying CGT. Married couples and civil partners may therefore realise gains of £6,000 if assets are held jointly.

Example:

An individual owns shares with a gain of £5,000. If the shares are sold in the current tax year, £3,000 of the gain would be tax free and the remaining £2,000 would be subject to CGT.

If the shares were transferred to a spouse before disposal, both individuals may use their £3,000 exemption and potentially avoid CGT entirely.

Tax Planning for Business Owners

Business owners operating through limited companies have several planning opportunities available before the tax year end.

Corporation tax currently applies at rates between 19% and 25% depending on company profits.

Common tax planning strategies include:

• Reviewing salary and dividend levels
• Making employer pension contributions
• Timing capital expenditure
• Reviewing shareholding structures
• Managing director loan accounts

Property Tax Planning

Property investors should regularly review the ownership structure of their properties.

Income from jointly owned property is normally taxed 50:50 between spouses unless an election is made to reflect the actual ownership percentages.

Example:

If one spouse pays tax at 40% and the other pays tax at 20%, adjusting the ownership structure of the property may reduce the total tax paid on rental income.

Inheritance Tax Planning

Inheritance tax thresholds remain frozen which means more estates may be subject to inheritance tax over time.

The nil rate band remains £325,000, with an additional residence nil rate band of £175,000 available in certain circumstances.

Lifetime gifts can reduce the value of an estate and therefore reduce inheritance tax liabilities.

Each individual can give away £3,000 per year free of inheritance tax and unused allowance from the previous year may also be used.

Making Tax Digital

Making Tax Digital for Income Tax will begin in April 2026 for many self-employed individuals and landlords.

Under these rules, taxpayers will need to maintain digital records and submit quarterly updates to HMRC using compatible software.

Businesses should ensure that they have appropriate accounting systems in place well before the rules come into effect.

Dividend Planning

The dividend allowance is now only £500 per year.

Dividends above this allowance are taxed at dividend tax rates depending on the individual’s tax band.

Planning around timing of dividends and share ownership structures can improve tax efficiency.

Director Loan Accounts

Directors borrowing from their company may face a tax charge if the loan is not repaid within nine months of the company year end.

This charge (known as s455 tax) can be significant and should be carefully managed.

Capital Allowances

The Annual Investment Allowance allows businesses to claim up to £1m of qualifying capital expenditure.

Companies may also benefit from full expensing rules allowing immediate tax relief on certain plant and machinery.

Electric Vehicles

Electric vehicles continue to benefit from favourable tax treatment including 100% capital allowances (new) and low benefit‑in‑kind rates.

They can therefore be a tax efficient option for directors and employees.

Family Tax Planning

Spreading income across family members can be effective where allowances would otherwise go unused.

Employing family members in a business may allow personal allowances to be utilised where commercially appropriate.

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