Tax Year End Planning: What Actually Matters Before 5 April 2026

The UK tax year closes on 5 April. After that date, most planning opportunities reset and unused allowances are lost permanently. For business owners, professionals, property investors and high earners, year-end planning is not about chasing performance - it is about structuring income and capital efficiently before the window closes.

Below are the core areas that should be reviewed before the end of the tax year.

Pension Contributions

Pensions remain one of the most powerful tax planning tools available under UK legislation.

Annual Allowance

The standard annual allowance is £60,000. Contributions above this may trigger an annual allowance charge unless unused allowance is available via carry forward.

High earners should be aware of the tapered annual allowance:

• Threshold income above £200,000 and
• Adjusted income above £260,000

can reduce the annual allowance down to as little as £10,000.

A full income assessment is essential before making large contributions.

Carry Forward

Unused annual allowance from the previous three tax years can be utilised, provided the individual was a member of a registered pension scheme during those years.

Carry forward can be particularly effective in:

• High income years
• Business sale years
• Large bonus or contract years
• Property disposal years

Where structured correctly, it can significantly reduce current income tax liability.

Pension Contributions from Limited Companies

For owner-managed businesses and property companies, employer pension contributions are often significantly more efficient than dividend extraction.

Employer contributions are generally:

• Allowable business expenses
• Deductible against corporation tax
• Free from employer and employee National Insurance

At a 25% corporation tax rate, a £40,000 employer pension contribution may reduce the company’s corporation tax bill by £10,000.

Compared to extracting profits via dividends (which may be taxed at 33.75% or 39.35% personally), pension funding can materially improve overall tax efficiency.

{{INSET-CTA-1}}

Adjusted Net Income & the 60% Tax Trap

For individuals earning over £100,000, personal allowance is reduced by £1 for every £2 of income above that threshold.

Between £100,000 and £125,140, the effective marginal tax rate can exceed 60%.

Strategic pension contributions can reduce adjusted net income, potentially restoring personal allowance and significantly reducing effective tax rates.

This is one of the most underutilised planning opportunities for professionals and directors.

ISA Allowance

The ISA allowance remains £20,000 per individual per tax year.

Unused allowance cannot be carried forward.

Benefits:

• No income tax on dividends or interest
• No capital gains tax
• No reporting requirements
• Full flexibility of access

For couples, this represents up to £40,000 per tax year into a tax-free wrapper.

Over time, systematically using ISA allowances reduces future CGT exposure and creates a flexible, tax-efficient capital pool outside pension structures.

Bed and ISA

Where clients hold taxable investments in a General Investment Account (GIA), year-end planning may involve a Bed and ISA strategy.

This involves:

• Realising gains within the CGT allowance
• Repurchasing investments inside an ISA

This process:

• Utilises the annual CGT exemption
• Gradually moves capital into a tax-free environment
• Reduces long-term reporting and tax drag

With the CGT annual exemption now reduced to £3,000, annual use is increasingly important.

Capital Gains Tax Planning

The current CGT annual exemption is £3,000 per individual.

Gains above this are taxed at:

• 10% / 20% for most assets
• 18% / 24% for residential property

Strategic realisation of gains before 5 April can:

• Use the annual exemption
• Reset base costs
• Reduce future tax exposure
• Support rebalancing

This is particularly relevant for:

• Landlords
• Business owners disposing of shares
• Investors holding concentrated positions

Dividend Planning

The dividend allowance is now £500 per year.

Dividends above this are taxed at:

• 8.75% (basic rate)
• 33.75% (higher rate)
• 39.35% (additional rate)

For directors and property company owners, extracting profits via dividends must be assessed alongside:

• Salary strategy
• Pension contributions
• Corporation tax position
• Spousal share structure (where appropriate)

With reduced allowances, inefficient dividend planning can significantly increase personal tax exposure.

Property Investors

Landlords should review:

• Rental profit position
• Mortgage interest restrictions
• Pension contributions to offset taxable income
• CGT planning on potential disposals
• Corporate extraction strategies (if using a limited company)

In higher-rate scenarios, pension funding can materially reduce the effective tax cost of rental profits.

8. High Earners & Complex Income Structures

For those earning above £200,000, careful modelling is required to:

• Assess tapered annual allowance exposure
• Avoid unexpected annual allowance charges
• Optimise employer vs personal contributions
• Manage bonus timing where possible

Mismanagement at this level can result in significant avoidable tax.

Junior ISAs & Family Planning

The Junior ISA allowance is £9,000 per child per tax year.

For families, structured funding:

• Removes future CGT exposure
• Builds long-term capital tax-efficiently
• Forms part of broader intergenerational planning

While not relevant for all clients, it can be powerful when integrated into wider wealth strategy.

International & Cross-Border Considerations

For internationally mobile clients:

• UK pension contributions may interact with overseas residency rules
• Temporary non-residence rules may apply
• Offshore structures may require review
• Double taxation agreements must be considered

Planning must be jurisdiction-sensitive and aligned with long-term residency intentions.

{{INSET-CTA-2}}

Practical Considerations Before 5 April

• Provider cut-off dates often fall in mid to late March
• Pension contributions must clear before tax year end
• ISA subscriptions must be completed, not merely instructed
• Carry forward calculations must be validated
• Anti-avoidance and commerciality tests apply for employer contributions

Late action frequently results in missed opportunities.

Final Observation

Tax year end planning is not about short-term investment returns.

It is about:

• Preserving allowances
• Reducing unnecessary tax
• Structuring income efficiently
• Positioning capital correctly for long-term growth

For many clients, the most valuable work done in a year happens in the final weeks before 5 April.