Spring Into Action: Make the Most of Your 2025/26 Tax Year Allowances
As we move past tax year end chaos, there’s a fresh opportunity to get ahead of your financial planning. The 2024/25 tax year closed on 5th April, and we are now into the new tax year — a perfect moment to take proactive steps that could significantly enhance your financial future.
At MHW, we encourage clients to make the most of the full tax year ahead rather than waiting until the final weeks. Why? Because the earlier you act, the more opportunity your investments have to grow — tax-free.
Here’s a clear breakdown of the key pension and ISA allowances available in the 2025/26 tax year, and why you should consider using them now rather than later.
Pension Allowances
Pensions remain one of the most tax-efficient ways to save for retirement. For 2025/26, the pension rules allow:
- Annual Allowance: Up to £60,000 (or 100% of your relevant earnings, whichever is lower) can be contributed across all your pensions and benefit from tax relief.
- Carry Forward: You may be able to contribute more than the annual allowance by using unused allowance from the previous three tax years.
- Tax Relief: Basic rate tax relief (20%) is automatically added to contributions to personal pensions, and higher or additional rate taxpayers may claim extra relief through their tax return.
Top Tip: Early contributions mean more time for your pension pot to benefit from investment growth opportunities, compounding, and tax relief.
ISA Allowances
ISAs (Individual Savings Accounts) are a powerful, flexible way to save and invest without paying tax on income or gains. For 2025/26, each eligible UK resident has a total ISA allowance of £20,000, which can be spread across the following types:
- Cash ISA
- Ideal for savers seeking security and easy access.
- No tax on interest earned.
- Stocks & Shares ISA
- Suitable for medium-to-long term investors.
- No capital gains tax or tax on dividends within the ISA.
- Innovative Finance ISA
- For peer-to-peer lending or crowdfunding investments.
- Higher potential returns, but with higher risk.
- Lifetime ISA (LISA)
- For those aged 18–39 only.
- Save up to £4,000 per year, with a 25% government bonus.
- Can be used to buy your first home or accessed from age 60 for retirement.
- Counts towards your overall £20,000 ISA limit.
- Junior ISA (JISA)
- For children under 18.
- Annual allowance of £9,000 for 2025/26.
- Available as either a Cash JISA or Stocks & Shares JISA.
- Grows tax-free and transfers to the child at age 18.
Remember: You can mix and match different types of ISAs, but you cannot pay into more than one of the same type in a single tax year (with the exception of JISAs for children).
Why Now Is Better Than Later
It’s common for investors to wait until the end of the tax year to use their allowances — but acting now has clear benefits:
- Tax-free growth starts sooner: The earlier you invest, the longer your money has to grow without the drag of tax.
- Cash flow flexibility: Spreading contributions across the year may be easier on your finances than a lump sum at year-end.
- Avoid the rush: Many providers and platforms experience delays in March/April — by acting now, you’ll avoid the last-minute pressure.
At MHW Financial Advisers, we’re here to help you make the most of the tax opportunities available this year. From optimising pension contributions to selecting the right mix of ISAs, your dedicated financial adviser can help tailor a strategy that supports your goals.
Spring into action — and give your money the best chance to grow.
Get in touch with your MHW adviser today to start planning ahead for a stronger financial future.