You can add up to £20,000 per tax year into an ISA, tax free. There are different ISAs available, depending on your goals.
Many tax allowances reset each tax year. If you don't use them by 5 April, you lose them. Review allowances such as Capital Gains Tax (CGT), Dividend Tax and Inheritance Tax (IHT) gifting allowance.
You can add up to an additional £60,000 to your pension each year tax-free, and unused allowances can be carried forward for up to three years under the carry-forward rule. This not only boosts your retirement savings but also reduces your taxable income. Pensions provide additional benefits, such as tax relief from the government, making them a tax-efficient investment.
Earning above £100,000 reduces your Personal Allowance, leading to an effective 60% tax rate on income. Pension contributions can mitigate this by reducing your taxable income and restoring lost allowances.
Changes introduced in the Autumn Budget have lowered the CGT allowance and Dividend Tax allowance. These reductions could lead to higher tax bills if your investments performed well.
From 6 April 2025, begin making ISA contributions to benefit from a full year of tax-free growth throughout 2025. Early planning helps maximise your returns – the earlier you start investing in an ISA, the more it could grow tax-free.
Tax efficiency isn’t just for the end of the tax year. Maintaining a strategy throughout the year ensures you maximise allowances and minimise liabilities. Seeking expert financial advice from a Chartered Financial Planner could ultimately help you make your money work harder for you.
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