As a new tax year begins, now is the perfect time to take control of your finances and optimise your tax position. Whether you're self-employed, a landlord, a high earner, or have multiple income streams, effective tax planning can save you thousands. This guide will walk you through key steps to ensure you're maximising allowances, reducing liabilities, and staying compliant.
Our 9 Key Tax Planning Steps for the New Tax Year
1. Review Your Personal Allowances & Tax Bands
Understanding where your income sits within the UK tax bands helps you plan effectively:
- Personal Allowance (2025/26): £12,570 (tax-free)
- Basic Rate (20%): £12,571 - £50,270
- Higher Rate (40%): £50,271 - £125,140
- Additional Rate (45%): Above £125,140
These are frozen until 5 April 2028.If you're near the threshold of a higher tax band, consider ways to reduce taxable income, such as pension contributions or charitable donations.
2. Maximise Your Pension Contributions
Pensions remain one of the most tax-efficient ways to save for the future. Contributions:
- Receive tax relief at your highest marginal rate
- Reduce your taxable income, helping you stay in a lower tax band
- Have an annual allowance of £60,000 (or 100% of earnings, whichever is lower)
For high earners, tapering rules apply, so getting advice on pension contributions is key.
3. Utilise Your ISA Allowance
- The ISA limit for 2025/26 remains £20,000
- Investments within an ISA grow tax-free and are free from capital gains tax
- Consider spreading investments across Cash ISAs, Stocks & Shares ISAs, and Lifetime ISAs
4. Consider Capital Gains Tax (CGT) Planning
If you plan to sell assets (property, shares, etc.), strategic timing can reduce your CGT bill:
- The annual CGT allowance is £3,000 (2025/26)
- Spreading disposals across tax years or transferring assets to a spouse can minimise liability
5. Dividend Tax Planning
If you receive income from dividends, plan accordingly:
- Dividend allowance for 2025/26: £500
- Dividend tax rates: 8.75% (basic rate), 33.75% (higher rate), 39.35% (additional rate)
- Business owners should consider salary vs. dividends for tax efficiency, and review their remuneration strategy and if it is appropriate for their situation.
6. Self-Employed? Plan for Making Tax Digital (MTD)
From April 2026, Making Tax Digital (MTD) for Income Tax will apply to self-employed individuals and landlords earning over £50,000. Get ahead by:
- Moving to cloud accounting software
- Keeping real-time digital records
- Understanding new quarterly reporting requirements
7. Reduce Your Income to Avoid the 60% Tax Trap
If you earn between £100,000 and £125,140, your personal allowance is reduced, creating a 60% effective tax rate. Strategies to reduce this include:
- Increasing pension contributions
- Making charitable donations
- Shifting income to a spouse or business structure
8. Plan for Inheritance Tax (IHT)
IHT planning is crucial if your estate is worth over £325,000 (or £500,000 if passing to direct descendants). Consider:
- Making tax-free gifts (up to £3,000 per year)
- Using trusts to reduce your taxable estate
- Taking out life insurance policies to cover IHT liabilities
9. Get Professional Advice Early
Tax laws are complex, and the earlier you plan, the more options you have. Our experienced team at Layers Accountancy specialises in:
- Tax-efficient strategies for high earners & self-employed professionals
- Proactive tax planning for landlords & business owners
- Navigating Making Tax Digital for Income Tax
We'd love to chat with you to help you optimise your tax position for the year ahead. Get in contact here.
