With the 2025/26 tax year now underway (beginning 6th April 2025), it’s a great time to plan how to use it or lose it allowances before the year-end on 5th April 2026. Making the most of these allowances can meaningfully boost your long-term financial health. Here’s what you need to know.
Summary Table: Allowances for 2025/26
| Allowance Type | 2025/26 Limit |
|---|---|
| ISA Allowance | £20,000 |
| Junior ISA Allowance | £9,000 |
| Lifetime ISA Allowance | £4,000 |
| Personal Allowance | £12,570 |
| Pension Annual Allowance | £60,000 (or earnings) |
| CGT Annual Exempt Amount | £3,000 |
| Dividend Allowance | £500 |
| Personal Savings Allowance | £1,000 / £500 / £0 |
| IHT Nil-Rate Band (NRB) | £325,000 |
| Residence NRB (RNRB) | £175,000 |
| Annual Gift Exemption | £3,000 (plus carry-forward) |
Our top 6 tips to maximise your tax allowances before the 2025/26 financial year ends
Below are the most common personal tax allowances that cannot be carried forward beyond 5th April 2026. Use them before they’re lost!
1. ISA Allowance for 2025/2026
You can invest up to £20,000 into ISAs, including Cash, Stocks & Shares, Innovative Finance, and Lifetime ISAs, this tax year (6 April 2025 to 5 April 2026). The Lifetime ISA has a separate cap of £4,000, while Junior ISAs (JISAs) remain at £9,000
As ISAs offer tax-exempt growth and withdrawals, this is usually the first allowance to be used. It may be sensible to consider whether other less tax-efficient investments could be encashed to generate funds to use the ISA allowance. Don’t forget that this allowance is the maximum allowed per tax year across all the ISAs & LISAs products you have.
We all know that ISAs are one of the most tax-efficient investment vehicles in the UK, but for many of us, this ISA allowance becomes wasted when we invest in Cash ISAs.
If your ISA is underperforming, like holding funds in a low-yield Cash ISA, consider transferring to a Stocks & Shares ISA or other more growth-oriented vehicles.
Just remember, transferring doesn’t break your current allowance. Such moves can enhance your tax-free growth potential.
Maximising the tax-free growth of ISAs means that many of our Clients will want to target growth over and above bank interest rates.
To help achieve this, we are delighted to offer our Direct Offer Service, which allows you to transfer any Cash ISAs you have quickly and simply into a Stocks & Shares ISA inside your existing True Potential Portfolio.
This service is completely free of charge with no initial fee from us, just our ongoing Service Fee of 0.75% per annum.
If you are not currently a Redwood Client and would like our help to transfer your Cash ISA(s) for free, submit your details via our website contact form and request an ISA Transfer Form, or call 01489 877 547, and we will arrange to send one out to you.
2. Personal Allowance for 2025/2026
The standard Personal Allowance remains at £12,570, though the amount will vary between individuals. If your income rises above £100,000, this allowance reduces by £1 for every £2 over that threshold, disappearing entirely above £125,140.
Additional allowances include up to £1,260 for the Marriage Allowance and £3,070 for the Blind Person’s Allowance.
Whatever your personal allowance, do not miss out on using it. If you are planning any taxable withdrawals, it may pay to bring them forward or withdraw up to your taxable allowance and invest it into an ISA.
3. Annual Allowance for 2025/2026
You can typically contribute up to £60,000 or your total UK earnings (whichever is lower) to a Pension and benefit from tax relief.
The Lifetime Allowance (LTA) has now been abolished, and replaced by the Lump Sum Allowance (LSA) and Lump Sum and Death Benefit Allowance (LSDBA) since April 2024.
We recommend that you review your Pension contributions to ensure you’re maximising this allowance, especially as future tax or Inheritance Tax changes planned for 2027 may alter Pension tax treatment.
4. Capital Gains Tax (CGT) Exempt Amount
For 2025/26, the CGT exemption is £3,000, unchanged from 2024/25.
Assets such as your main home, ISAs, and Pensions remain exempt, and losses can offset gains. However, please note that only losses can be carried forward, not the allowance itself.
Using strategies like ISAs, spreading disposals, or transferring assets between spouses to optimise allowance use can help mitigate CGT.
6. Inheritance Tax Exemptions for 2025/2026
The nil-rate band (NRB) remains at £325,000, with the residence nil-rate band (RNRB) providing an additional £175,000 when a home is passed to direct descendants, allowing a couple to pass on up to £1 million tax-free.
The £3,000 annual gift exemption has been frozen since 1981. Its real value has shrunk due to inflation
There are more IHT exemptions, the details of which you can find here.
Contact Redwood Financial for Advice
Please note that this blog article is not advice and does not mean that using these allowances is right for you. Please contact us if you want further information on any of the above or think you have allowances that aren’t being used. One of our Advisers can provide bespoke advice tailored to your situation.
