Stay Ahead This Year: Smart Tax Planning Tips for 2026

As we settle into 2026, you’ve probably already set a few New Year’s resolutions. While budgeting and saving for the future may be high on your list, now is also the ideal time to review your tax planning and ensure you’re taking full advantage of the reliefs and allowances available to you.

With the tax year-end deadline of 5 April 2026 fast approaching, here’s a quick checklist to help you get started.

• Take advantage of your ISA allowances

If you can, take full advantage of this year’s £20,000 ISA allowance. It’s also worth checking your spouse or partner has maximised their own ISA allowance, as this could mean as much as £40,000 invested tax efficiently.

You can also put up to £9,000 per child or grandchild into Junior ISAs. It’s a great way to pass money to the next generation, tax efficiently. A parent or guardian will be required to set up the Junior ISA, but anyone can contribute to the savings.

 The recent budget announced that from 2027 the cash ISA limit will drop to £12,000 with the overall allowance remaining at £20,000. This change will not affect the over 65s’.

• Maximise your pension pot

If you’re at the point in your life where you’re increasing your pension contributions, consider whether you can pay in the full annual allowance. You may also be able to carry unused allowances over from the last three tax years. It’s worth checking whether you used your full allowances each year, from 2022/23 onwards. The potential for tax changes from April makes tax wrappers like ISAs and pensions even more important to use in full.

• Are you nearing retirement?

If you’re coming up to retirement and thinking of making a large pension withdrawal, talk to us about spreading the withdrawal over two or more tax years. This will minimise your Income Tax liability.

• Inheritance Tax Planning (IHT)

Use this tax year as an opportunity to make use of your annual IHT gifting exemption of £3,000. The annual IHT exemption can be carried forward for one tax year so if you didn’t use it in 2024/25, you could gift up to £6,000 before 6 April 2026 and the amount gifted will leave your estate immediately and so won’t be liable for Inheritance Tax.

Did you know? From April 2027, it is proposed that most unused pensions will be included in the value of your estate and therefore may be subject to inheritance tax.

• Dividends

If you own a business, consider taking dividend income instead of or in addition to salary. In this tax year the first £500 of dividend income is tax free and dividend income above the dividend allowance is taxed at lower income tax rates than salary. You may also be able to minimise National Insurance contributions (NICs) too. It is however important to note that dividends are payable out of post-corporation tax profits so professional advice will be essential to determine the best remuneration strategy to optimise tax-efficiency overall.

• Capital Gains Tax (CGT)

Take advantage of your annual CGT exemption, which was reduced from £6000 to £3000 in the 2024/25 tax year.

• Avoid the 60% tax trap

If you’re a high earner, you may be able to bring your taxable income down by putting more money in your pension or making charitable donations. These can:

• Bring your income down below the additional rate tax band, which starts at £125,140.
• Help you hold on to your Personal Allowance, which is slowly withdrawn once you earn over £100,000.
• Help you hold on to your Child Benefit, which is gradually withdrawn if one parent in the household earns more than £60,000.

We can help

Ensure you make the most of your available tax reliefs and allowances by reviewing your unique circumstances with one of our Financial Advisers. We offer a no obligation first meeting. Click here to arrange a meeting.

The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Cash ISAs are not available through St. James's Place.

Although the content of the article was correct at the time of writing, the accuracy of the information should not be relied upon, as it may have been subject to subsequent tax, legislative or event changes.