New tax year, fresh start - here’s where to focus

Most of the tax year-end conversation is about deadlines, but the start of a new tax year deserves just as much attention. You've got a full set of allowances ahead of you as well as twelve months of potential growth, which means that money that's invested now has the longest possible time to work for you.

Here are the key areas worth thinking about.

Making your money grow tax-efficiently

ISAs: From April 6, you’ve got a fresh £20,000 ISA allowance, and the earlier you put it to work, the longer it can benefit from tax-free growth.

A regular monthly contribution is the simplest way to build momentum with your ISA. The same applies to a Junior ISA (£9,000 per child) and a Lifetime ISA (up to £4,000 with a 25% government bonus for contributions made before age 50). Unlike pensions, ISA allowances can’t be carried forward – so it really is a case of ‘use it or lose it’.

Pensions: These are still the most tax-efficient long-term savings tool available. The annual allowance is £60,000, and unused allowance from the past three years can be carried forward.

For every £1,000 you contribute, the government adds £250 in basic-rate relief - and higher-rate taxpayers can claim another £250 through self-assessment. You can also contribute £2,880 a year into a pension for a non-earning spouse, child or grandchild, which is automatically topped up with 20% tax relief by HMRC to £3,600. Over decades, even modest contributions can become life-changing.

Reducing what you owe

The £100k trap: If your income is likely to fall between £100,000 and £125,140, you’ll lose £1 of personal allowance for every £2 over £100,000 - an effective tax rate of around 60%. Pension contributions are the most straightforward way to bring your taxable income back below the threshold. The key is to plan this now, while you still have a full year of options.

Capital gains: The Capital Gains Tax allowance is just £3,000 per person, and with rates at 18% (basic) and 24% (higher), even moving money from a general investment account to an ISA can trigger a charge. Spreading transactions across the year and between spouses helps. If you have unrealised losses, make sure they’re registered so they can be offset against future gains.

Business owners: With dividend tax rates rising, the balance between salary, dividends and pension contributions is worth revisiting. Check you’re making the most of legitimate business expenses too - relevant life policies, family members’ allowances, and running things like private medical insurance through the company can all add up over a year.

Protecting what you’ve built

With Inheritance Tax (IHT)  thresholds frozen and pensions set to be included in estates from April 2027, more families could become caught in the IHT net. This is the area where starting early makes a big difference:

•       Use your £3,000 annual gifting allowance - you can give away a total of £3,000 each tax year, to one person or split between several, completely free of IHT. Any unused portion can be carried forward to the following year.

•       Start the seven-year clock on larger gifts - you can gift any amount above the £3,000 annual exemption, but if you pass away within seven years, the gift may still be subject to IHT on a sliding scale. After seven years, it falls out of your estate completely though, so the sooner you act, the sooner that clock starts running.

•       Look into gifts from surplus income - regular gifts from income you don’t need can be immediately exempt, with no seven-year wait.

•       Review your will and how your home is owned - everyone gets a £325,000 nil-rate band, and if you pass your home to direct descendants, there's an additional residential nil-rate band (RNRB) worth up to £175,000 per person. But for estates over £2 million, the RNRB starts to taper - and by £2.7 million it's gone entirely. One simple step that can help is that if you own your home jointly, switching from joint tenants to tenants in common means each person owns a distinct share. That way, the first person's share passes through their will rather than automatically to the survivor, which can preserve the RNRB on first death. It's straightforward to arrange and typically costs just a few hundred pounds.

•       Consider whether trusts could help - a discounted gift trust lets you retain income while moving capital out of your estate; a loan trust can ring-fence assets within a family.

Let’s make this year count

None of this needs to be complicated, but it does need to happen at the right time - and the start of the tax year is exactly that. If anything here has sparked a question, or you’d like to talk through how it applies to your situation, we’d love to hear from you.