Why taking action early in the tax year matters
Using your allowances sooner provides:
- More potential for compounding tax‑free growth
- Greater flexibility to adjust plans before year‑end
- Better control over cash flow
Key tax allowances and planning opportunities
Pensions and retirement planning
Pensions remain the most tax‑efficient long‑term savings vehicle.
Key pension allowances
- Annual allowance: Up to £60,000 per tax year. You can typically carry forward any unused allowance from the previous three tax years. This allows you to contribute more to your pension and receive tax relief.
- Tax relief:
- The government automatically adds 20% onto personal contributions.
- Higher/additional‑rate taxpayers can reclaim an extra 20% or 25% through self‑assessment.
- Tapered annual allowance: This may apply if someone’s income exceeds £200,000.
No lifetime allowance cap on pensions, following its abolition in 2024. (The cap on withdrawal of tax-free lump remains in place, which can limit the tax efficiency of additional contributions beyond a certain point).
Why act early?
Investing at the start of the year gives contributions more time to potentially grow. The more time you stay invested, the more chances you have for your wealth to compound and grow. Doing this in a tax-advantaged environment means you’ll get to keep more of your money overall. However, it's important to remember that the value of investments can go down as well as up and you could get back less than you invest.
Individual savings account (ISA) allowances
In the 2026/27 tax year, ISAs continue to offer a tax‑free way to save and invest. They’re one of the most powerful financial tools you have at your disposal to grow your wealth.
ISA limits
- £20,000 total allowance across all ISA types for adults.
- Lifetime ISA (LISA) (can be opened by 18-39 year olds):
- £4,000 annual limit
- 25% government bonus
- Property purchase cap remains £450,000
- Junior ISA (can be opened for children up to the age of 18):
- Up to £9,000 per child per tax year.
Unused ISA allowances can’t be carried forward to subsequent tax years, so it’s best to use as much of your annual £20,000 allowance as you can.
Dividend tax and capital gains tax (CGT) – 2026/27
Dividend allowance
- The 2026/27 allowance remains £500.
CGT exemption
- Annual exemption amount: £3,000 per individual.
CGT rates from April 2026
- Basic‑rate taxpayers will pay 18% on most gains.
- Higher/additional-rate taxpayers will pay 24% on most gains.
Because both allowances are at historic lows, using ISAs and pensions to protect and keep more of your wealth is more important than ever.
Property tax changes
Several reforms affect property investors:
- CGT on residential property:
- Higher‑rate CGT reduced from 28% to 24% (from April 2024).
- Furnished holiday lettings regime:
- Abolished from April 2025, removing income tax and CGT reliefs.
- Multiple dwellings relief:
- Abolished from June 2024.
These changes may affect rental yields, sale timing, and your broader wealth strategy.
Child benefit – important changes
- From 2024 reforms:
- Child benefit begins to taper at £60,000, ending completely at £80,000.
- From April 2026 the two-child limit will be removed.
This may benefit two‑income households but disadvantage single parents. Planning ahead is key.
Annual gifting allowances (inheritance tax planning)
Gifting can help reduce the value of your estate over time and is a key part of inheritance tax planning.
The key figures:
- £3,000 annual exemption, with potential to carry forward one unused year.
- Unlimited £250-worth of small gifts per recipient (if no other exemption is used).
- Wedding gifts:
- £5,000 to a child
- £2,500 to a grandchild/great‑grandchild
- £1,000 to others
- Junior pensions:
- Up to £2,880 annually per child (boosted to £3,600 with 20% tax relief)
These strategies can help reduce future inheritance tax while supporting younger family members.
Charitable donations and Gift Aid
Gift Aid continues to offer tax‑efficient giving:
- Charities can reclaim 20%.
- Higher‑rate and additional‑rate taxpayers reclaim an extra 20% or 25% via self‑assessment.
Marriage allowance
If one partner earns below the personal allowance (£12,570), they can transfer £1,260 to their basic‑rate‑paying partner, reducing their tax bill by up to £252.
This often benefits retired people, carers, or households with uneven earnings.
Top tips for saving and investing in 2026/27
- Use allowances early to maximise growth opportunities.
- Set up monthly contributions if you can’t allocate the full amount upfront.
- Review all available tax allowances, especially lesser‑known ones.
- Work with your Rathbones contact to tailor a tax‑efficient strategy for you and your family.
Ready to make the most of your tax allowances?
A financial planner can help you make the most of your tax allowances. Every pound you save in tax can be put towards your investments, which can help boost your returns over the long term.
Reach out to your usual Rathbones contact or fill out our form below to get in touch.
You can see all the tax thresholds, rates, and allowances for 2026/27 here.
