How to Make the Most of Tax Allowances Before the End of the Tax Year
In our first insight this month, we explored the value of financial planning. A large part of that value is behavioural: having a plan, understanding what matters and making decisions before deadlines become urgent.
In this insight, we are looking at tax allowances.
There will always be headlines about possible changes to ISAs, pensions and taxation. Some changes will matter greatly to some people. For many, however, the more useful question is simpler:
Are you making the most of the allowances that are relevant to your own plan?
Not everyone will use every available allowance, nor should they. Tax planning should support your goals, not become the goal itself. But when an allowance is suitable, planning early can give you more time, more options and fewer rushed decisions.
The deadlines we all know—but still manage to miss
There are certain dates we know are coming, yet they can still arrive surprisingly quickly.
For many people, two of the most important are:
31 January — the usual deadline for submitting an online Self-Assessment tax return and paying any tax due.
5 April — the end of the tax year, when many annual allowances reset.
A financial plan helps bring these dates into view well before they become a last-minute concern.
Why autumn can be a better time to review your finances
January is traditionally the time for resolutions. The difficulty is that it is often a busy and expensive month, and good intentions can quickly be overtaken by everyday life.
We prefer the idea of an autumn reset.
October is a useful point in the year to pause and review where you are. Perhaps you have changed jobs, received a bonus or redundancy payment, sold a business, inherited money or simply built up more cash than expected.
There is still time before the end of the tax year to consider the options properly. That does not mean making a decision for the sake of it. It means understanding the choices available and deciding whether action is appropriate.
Which tax allowances might be relevant?
The right allowances depend on your circumstances, your income and what you are trying to achieve.
ISAs
For the 2026/27 tax year, the overall ISA allowance is £20,000 per person. Unused ISA allowance is generally lost at the end of the tax year; it cannot simply be carried forward into the next one.
That can make the period before 5 April important for someone with cash or investments outside an ISA. A couple could potentially use up to £40,000 between them before the tax year ends, if this suits their plan and they have the funds available.
The key word is potentially. An ISA can be valuable because future income and gains are normally free of UK tax, but it should sit alongside the need for accessible cash, pension funding and wider investment planning.
Pensions
Pensions can be more flexible, but they also need more care.
Depending on your circumstances, it may be possible to use unused annual allowance from the previous three tax years. This is known as carry forward. The rules are detailed: eligibility, pension input amounts, relevant earnings, the money purchase annual allowance and the tapered annual allowance can all affect what is possible.
For someone who has received a bonus, changed jobs or has irregular income, checking pension allowances well before the end of the tax year can be particularly worthwhile.
Other allowances
A wider review may also include:
The Capital Gains Tax annual exempt amount
Dividend and savings-income allowances
Using both spouses’ or partners’ allowances where appropriate
Junior ISAs and Lifetime ISAs
Specialist investments such as VCTs, EISs and SEISs
Inheritance Tax planning, including Business Relief where suitable
These are not a checklist to complete each year. They are options to consider in the context of a personal financial plan.
Tax planning in retirement is different
For someone building wealth, the question may be where to place new savings to support a long-term goal.
For someone in retirement, the question is often how to create a sustainable income in a tax-efficient way.
This could involve considering the order in which income is taken from pensions, ISAs, cash savings and investments held outside tax wrappers. It may include using available income-tax bands, interest allowances or Capital Gains Tax exemptions where appropriate.
It is important to remember that the State Pension is taxable income, even though tax may not be deducted directly from it. This can become more relevant when someone also receives private pension income, interest or investment income.
The objective is not to avoid tax at any cost. It is to make sure income supports the life someone wants to lead, while avoiding unnecessary tax where sensible.
Three examples of tax planning in practice
The following examples are simplified and illustrative. The right approach will always depend on an individual’s circumstances.
Client A: a change of employment
A client was leaving a role and expected taxable employment income to be high in that tax year.
Before their employment ended, they reviewed their pension position, including whether an employer pension contribution or salary-sacrifice arrangement could be made as part of their wider package. The aim was to consider whether this would reduce their adjusted net income and support their longer-term retirement plan.
This required care. Not all parts of a termination payment are treated in the same way for tax purposes, and the first £30,000 of a genuine redundancy payment is generally tax-free and does not count as relevant earnings for personal pension tax relief.
The value was not simply in “saving tax”. It was in taking time to understand the package, the pension rules and the longer-term consequences before decisions were finalised.
Client B: a business owner with surplus cash
A business owner had spent years reinvesting in their company and had built up surplus cash.
Part of the planning discussion was whether employer pension contributions could help move some value from the business into a personal retirement fund. Subject to the company’s circumstances and the usual tax rules, employer pension contributions may be an allowable business expense.
The decision was not just about Corporation Tax. It was about balancing the needs of the business today with the owner’s future financial security and the eventual shape of their retirement.
Client C: a retired couple
A retired couple had State Pension income, cash savings and investments held outside ISAs.
Their review considered whether they could use their ISA allowances to move some existing investments into a tax-efficient wrapper over time. With two ISA allowances available, they could potentially invest £40,000 before 5 April and a further £40,000 from the start of the next tax year, subject to their circumstances and investment approach.
They also considered how to meet income needs from a combination of pension benefits, ISAs and other investments. For some retirees, tax-free pension cash and ISA withdrawals can play a useful part in an income plan, but this needs to be balanced against long-term sustainability, investment risk and future flexibility.
Allowances are only valuable when they support your journey
It is tempting to focus on an allowance because it has a deadline attached to it. But good financial planning starts with you.
Your goals, income, family, business, retirement plans and attitude to risk should lead the conversation. The relevant allowances then become tools that can support the journey.
At Castlebay, we take time to understand the wider picture. For some people, that will mean building wealth tax-efficiently. For others, it may mean creating a sustainable retirement income, helping children and grandchildren, or making a one-off decision with confidence.
The key is not to use every allowance. It is to use the right ones, at the right time, for the right reasons.
Frequently asked questions
When does the tax year end?
The UK tax year runs from 6 April to 5 April. Many annual tax allowances, including the ISA allowance, reset on 6 April.
Can I carry forward unused ISA allowance?
Usually, no. If you do not use your ISA allowance by the end of the tax year, it is normally lost. Some flexible ISAs allow you to replace withdrawals within the same tax year, subject to the provider’s rules.
Can I use unused pension allowances from previous years?
Possibly. Pension carry forward can allow unused annual allowance from the previous three tax years to be used, but detailed conditions apply. It is important to check the position before making a contribution.
Is the State Pension taxable?
Yes. The State Pension is taxable income, although tax is generally collected through other income sources or a tax-code adjustment rather than deducted directly from the State Pension.
Should I use every tax allowance available to me?
Not necessarily. Tax allowances should support your financial plan. It is often better to retain suitable cash reserves or meet another priority than to make an investment simply because a deadline is approaching.
Important information
This article is for general information only and does not constitute financial advice. Financial planning and investment decisions should be based on your individual circumstances. Tax rules and legislation can change, and their impact will depend on your personal situation. If you would like advice tailored to your circumstances, please speak to a qualified financial planner.
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Last reviewed: October 2026
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