This article is for general guidance only and is not financial or professional advice. Any links are for your own information, and do not constitute any form of recommendation by Saga. You should not solely rely on this information to make any decisions, and consider seeking independent professional advice. All figures and information in this article are correct at the time of publishing, but laws, entitlements, tax treatments and allowances may change in the future.
We are approaching the end of the tax year. For millions of people, this is the “use it or lose it” deadline.
If you don’t use your allowances by midnight on April 5, they vanish. In most cases, you can’t carry them over.
With tax allowances that have been frozen or even shrinking, more people are paying tax, and at higher rates. So it’s vital you claim every penny you are entitled to.
Here’s your essential checklist for the 2025/26 tax year.
What’s on this page?
Most people can earn £12,570 a year before paying a penny in income tax. This has been frozen since 2020 and won’t budge until 2031.
However, your retirement income – state pension, private pensions and any earnings – all counts towards this. With the state pension rising in April to just over £12,500, your ‘wiggle room’ before paying tax is fast disappearing.
Action: Check your tax code and fix it if it’s wrong. Make sure you understand how pensions are taxed.
Basic rate taxpayers can earn £1,000 in savings interest tax-free (the personal savings allowance). Higher rate taxpayers get £500. Additional rate taxpayers get zero. With interest rates remaining decent, it is very easy to breach this limit and get hit with a tax bill.
The fix: Move savings into an ISA, either a cash ISA or a stocks and shares ISA. Interest earned in an ISA is 100% tax-free and does not count towards your personal savings allowance. If you have a low income, make sure you are benefiting from the starter rate for savings.
If you take £20,000 purely from a pension, you pay tax on everything above £12,570.
If you take £15,000 from a pension and £5,000 from an ISA (which is tax-free):
You can put up to £20,000 into ISAs this tax year. This shields your money from income tax, tax on dividends, and capital gains tax (CGT) forever. You can save into a cash ISA or stocks and shares ISA, or both. Investing can deliver greater returns over the medium to long-term compared with cash savings, though it also involves some risk, and you may not get back the original amount you invested.
If you have shares outside an ISA, you can sell them and immediately buy them back inside your ISA. This uses up your £20,000 allowance and protects future growth from the taxman
Children have their own junior ISA allowance of £9,000 a year, so you could fill it up for them on top of your own ISA allowance. They can’t touch it until they are 18. Read how you could make your grandchild a millionaire.
If you are married or in a civil partnership, you could shift £1,260 of your personal allowance to your partner. This saves up to £252 in tax. To qualify, one of you must be a non-taxpayer (earning under £12,570) and the other a basic-rate taxpayer (a starter, basic or intermediate-rate taxpayer if you’re in Scotland). Rosie Hooper, chartered financial planner at Quilter Cheviot, says: “Income levels could vary, perhaps due to different pension provision or one of you stopping working. If this happens, it’s easy to apply.”
Action: You can backdate this claim for up to four years, potentially netting a refund of over £1,000.
Saving into a pension can reduce your income tax bill today, as contributions attract tax relief. Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, says: “Basic rate taxpayers receive 20% tax relief, while those paying higher-rate (40%) or additional-rate (45%) can claim a further 20% and 25% respectively, typically through their tax return. This means a £1,000 gross contribution costs a basic-rate taxpayer £800 after tax relief. For a higher rate taxpayer, the net cost is £600 while for an additional-rate taxpayer the net cost falls to £550.”
Ed Monk, associate director at Fidelity International, says: “You can continue to pay into a pension until age 75 and potentially benefit from tax relief. This turns an £80 contribution into £100 inside your pension.” He adds: “[Currently], up to 25% of the money you pay into a pension can usually be paid to you tax-free, with the rest taxed as income.”
The annual allowance for contributions (including your contributions, any employer contributions and tax relief) is usually £60,000, or 100% of your qualifying earnings, whichever is lower.
Even if you have retired or stopped working, the government will still give you free cash for saving into a pension. Non-earners can pay in £2,880 a year. The government adds tax relief automatically, topping it up to £3,600. That is £720 of free money.
Warning: Once the money is paid into a pension, it cannot typically be accessed until the age of 55, or 57 from 2028. Plus, exceed your annual and you may incur an additional tax charge. If you have already accessed your pension flexibly, your allowance might be capped at just £10,000. Read more about the money purchase annual allowance (MPAA).
You can make £3,000 profit on investments (like shares or a second home) this year before paying capital gains tax (CGT). If you have big gains, consider selling enough assets to use up this £3,000 allowance before April 5. You can’t roll it over.
Jason Hollands, managing director at Evelyn Partners, says: “If the investment case makes sense, you could sell assets to use up the allowance.” Married couples and civil partners have a tax advantage – the opportunity to make ‘interspousal transfers’ where savings and investments can be switched between them without triggering a ‘tax event’.
This enables couples to maximise two sets of allowances and ensure any assets liable for tax are held by the partner subject to lower rates of tax. This applies to capital gains tax and dividend tax allowances, and the personal savings allowance too.
Alice Haine says: “Before transferring shares, funds or cash to your other half, remember they become the full, legal owner of the assets, so this is an unwise move if the relationship is not on stable ground.”
Making extra cash? You can earn up to £1,000 from a side hustle (like eBay or Etsy) and £1,000 from property income tax-free, without even declaring it. Rent a room scheme: If you rent out a furnished room in your own home (to a lodger or on Airbnb), you can earn £7,500 a year tax-free. If you earn less than this, you don’t even need to fill in a form.
Earn more than £7,500, and you’ll need to complete a tax return.
Become more successful with your side hustle and you can choose to continue using the tax-free allowance - or register with HMRC to claim any allowable expenses instead. You can’t usually do both.
You can give away £3,000 this year without it being counted for inheritance tax (IHT). You can also give small gifts of £250 to as many people as you like (as long as they haven’t received the £3,000).
Jason Hollands explains: “Over time, you can chip away at the size of your estate while also helping out younger relatives financially.”
If you have more income than you need, you can give away the surplus tax-free, provided it is regular and leaves you with enough to live on. Rosie Hooper adds: “I’ve seen people use it to cover their grandchildren’s childcare but it could be used for any regular payment.”
Action: Keep a clear record of these gifts. If you don’t write it down, HMRC might challenge it later.
Find out more about how Saga could help you with your savings and investments.
If you need to complete a self-assessment tax return, you'll need to submit it by 31st January. We're here to help you with what to do.
