With the festivities behind us, it is time to turn our thoughts to the next ‘new year’, on 5 April.
Last year’s Budget revised the Chancellor’s fiscal calendar. From now on, the Office for Budget Responsibility (OBR) will make only one full assessment a year of the UK’s finances, alongside the Autumn Budget, leaving the Spring Statement due in March as little more than a minor update.
Things to consider before tax year end
The tax year will still end on 5 April (Easter Sunday in 2026). Normally, many changes announced in the Budget would take effect on the following day, but that is not the case in 2026. Indeed, some of the measures of the Budget 2025 are not due to take effect until 2028 or later. Even so, there is plenty to consider now in terms of year-end tax planning. For example:
Threshold planning: The Budget did nothing to remove the anomalies in the income tax system created by arbitrary thresholds. The most significant of these are:
The high income child benefit charge threshold starting at £60,000 (and ending at £80,000)
The £100,000 threshold at which the personal allowance begins to be tapered (ending at £125,140) and tax-free childcare is lost (falls off the cliff, with no tapering).
As the year end nears, and estimating your 2025/26 income becomes easier, there can be opportunities to either sidestep the thresholds or take advantage of gaining tax relief at the high rates they create.
Inheritance tax (IHT): In the Budget, the IHT nil rate band (£325,000) was frozen for another year (to April 2031), having last been increased in April 2009. That makes it even more important that you do not waste your yearly gift exemptions – the £3,000 annual exemption, £250 small gifts exemption, and the least understood, but potentially most valuable exemption, for normal expenditure gifts.
Marriage Allowances: If you or your spouse/civil partner had income below the personal allowance in 2021/22 (£12,570, as it now will be until April 2031), you have until 5 April 2026 to claim the marriage allowance for that year (£1,260), which could produce a tax saving of up to £252. A claim can only be made if the other partner was a basic rate taxpayer (starter, basic or intermediate rate in Scotland) in 2021/22. The principle applies (with an allowance of £1,260) for all subsequent years, so you might be able to reclaim over £1,250.
There are many other points to consider but do take advice before taking action. Our Autumn Budget 2025 summary is available to read here.
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Please contact us if you need any assistance with your Self Assessment tax return, and to find out how you we can help you to reduce your tax liabilities and maximise your tax efficiency.
Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.
