Essential personal finance tips for people with savings or in work before the 2025/26 financial year ends on April 5.
With the end of the tax year fast approaching, people still have time to review their finances and take full advantage of the allowances available to them. As allowances continue to shrink, tax rates rise and further changes approach, effective tax planning is becoming increasingly important for individuals.
To help people take action before the end of the tax year on April 5, WEALTH at work has outlined the key tax and savings changes to consider.
People now face a rapidly shifting environment when it comes to allowances and tax rules. The tax-free dividend allowance has fallen sharply from £5,000 in 2017/18 to just £500 today.
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At the same time, the Capital Gains Tax (CGT) exemption has decreased from £12,300 in 2022/23 to £3,000, and CGT rates rose in October 2024 to 18 per cent for basic rate taxpayers and 24 per cent for those paying above the basic rate.
Elevated interest rates have also resulted in more savers exceeding their Personal Savings Allowance – the amount of tax-free interest that can be earned on savings each tax year (set at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers), leading to unexpected tax bills for many.
Further tax changes on the horizon
There are more tax changes coming over the next two years. From April 6, 2026, dividend tax rates will increase from 8.75 per cent to 10.75 per cent for basic rate taxpayers, 33.75 per cent to 35.75 per cent for higher rate taxpayers, while the additional rate dividend tax will remain at 39.35 per cent.
From April 2027, savings income tax rates – the rates of income tax applied to interest earned on savings once taxfree allowances are exceeded – will also rise. They will increase from 20 per cent to 22 per cent for basic rate taxpayers, 40 per cent to 42 per cent for higher‑rate taxpayers and 45 per cent to 47 per cent for additional – rate taxpayers.
ISA allowances: still valuable but changing
ISAs remain one of the most effective ways for people to shelter their savings and investments from tax, with the current £20,000 annual allowance protecting income from interest – meaning any interest earned on savings held within the ISA is completely tax‑free, as well as dividends and capital gains.
However, this landscape is due to change. From April 2027, individuals under the age of 65 will be limited to £12,000 in Cash ISA contributions, while those aged 65 and over will retain the full £20,000 limit.
Although the overall ISA allowance will stay frozen at £20,000 until at least 2031, a greater portion will need to be directed into investment‑based ISAs rather than cash. This means individuals should review their finances before April 5 to ensure they do not miss out on valuable tax benefits.
Key considerations ahead of the tax year end
Jonathan Watts-Lay, Director, WEALTH at work, said: “Individuals may benefit from looking at maximising their ISA contributions and reviewing any savings held outside tax-advantaged accounts.
“It may also be sensible to use any remaining allowances and reliefs, assess their exposure to dividend and savings income taxes, and prepare for the upcoming changes to limits and rates before the yearend deadline.”
Why workplace support is essential
Mr Watts-Lay explained: “An increase in taxes and reduction in allowances means that people will have less money in their pocket, making it more important than ever for individuals to take control of their finances and maximise any income or savings they have through careful tax planning.
“Many workplaces provide staff with financial education, guidance and access to investment advice to help them understand how tax changes may affect their finances.
“They may also provide access to tax-efficient savings options such as Workplace ISAs which can help build financial resilience. It’s always worth speaking to your employer to see what support they provide.”
