Why the best tax year planning starts in April, not March
The most effective tax year planning begins on 6 April, when your allowances reset and you have a full 12 months to use them. Starting early gives you time to make thoughtful decisions, respond to life changes, and take advantage of reliefs that need years to work, like the seven-year rule for inheritance tax gifting.
Most people leave it until March. The reminders flood in, everything feels urgent, and there's a scramble to top up ISAs or squeeze in a pension contribution before the deadline. It works, just about, but rushing limits your options. Allowances like the £3,000 capital gains exemption and the £500 dividend allowance simply disappear on 6 April if they go unused.
This guide walks through what resets at the start of each new tax year, the tax traps that catch people out, what's changing for 2026/27, and how to keep your personal tax planning on track throughout the year.
What resets on 6 April
On 6 April, most of your tax allowances reset to zero. A few can be carried forward, but the majority are gone if you haven't used them. Knowing what you're working with at the start of the tax year puts you in a much stronger position than discovering what you've missed at the end of it.
| Allowance | 2026/27 amount | Carries forward? |
|---|---|---|
| ISA allowance | £20,000 | No |
| Pension annual allowance | £60,000 | Yes, up to 3 years |
| Capital gains tax exemption | £3,000 | No |
| Dividend allowance | £500 | No |
| IHT annual gifting exemption | £3,000 | One year only |
| Personal savings allowance (basic rate) | £1,000 | No |
The ISA allowance is easy to overlook until the deadline is close. You can save or invest up to £20,000 across cash and stocks and shares ISAs each year, completely free from income tax and capital gains tax. Transferring that money in April rather than scrambling in March means your investments also get an extra 11 months of potential growth.
Pensions are slightly different because unused annual allowance can be carried forward from the previous three tax years. If you haven't been contributing much recently, you could put away well over £60,000 in a single year. We'd always recommend working through the numbers early, especially if you need to coordinate contributions with an employer.
The dividend allowance has been cut significantly over the past few years, from £2,000 in 2022/23 to just £500 today. If you run a company and pay yourself through dividends, more of your income is now taxable. From April 2026, the rates are going up too: 10.75% at basic rate and 35.75% at higher rate, up from 8.75% and 33.75% respectively. Sitting down with your accountant at the start of the year to plan how you extract profits gives you far more control than trying to adjust things in the final quarter.
Your capital gains exemption sits at £3,000. It's modest, but using it each year through careful, phased disposals can quietly reduce a much larger future tax bill. That only works if you give yourself the time to do it thoughtfully.
Tax traps to map out early
Tax year planning is most valuable when it helps you avoid the thresholds that trigger unexpectedly high charges. These traps sit at specific income levels, and the earlier in the year you identify them, the more options you have to manage them.
The 60% tax trap
If your income falls between £100,000 and £125,140, you lose £1 of personal allowance for every £2 you earn over £100,000. The effective marginal tax rate on that band of income is around 60%.
To put that in context, someone earning £110,000 pays significantly more tax on that last £10,000 than someone earning £90,000 pays on theirs.
The most common way to bring your adjusted net income back below £100,000 is through pension contributions. A £10,000 pension contribution could effectively save you £6,000 in tax at this level.
Making that contribution in April or May, based on your expected earnings for the year, gives you and your adviser time to get the amount right. Doing it in March based on a rough estimate is far less precise.
The pension tax trap
If you've already accessed your pension flexibly, your annual allowance drops from £60,000 to just £10,000. This is the Money Purchase Annual Allowance, and going over it triggers a tax charge with no carry forward available.
This tends to affect people who are still working and contributing to a workplace pension while also drawing from another pension pot. Checking your position at the start of every tax year takes five minutes and could save you thousands.
The inheritance tax seven-year clock
Gifts above the £3,000 annual exemption only fall outside your estate for inheritance tax purposes once seven years have passed. Every April that goes by without starting is another year added to that timeline.
This is where early planning has the biggest long-term impact. A couple who begins gifting in April 2026 will have those gifts fully outside their estate by April 2033. The same couple waiting until March 2027 to think about it have already lost a year.
With inheritance tax receipts reaching record levels and the nil-rate band frozen at £325,000 until at least 2030, this is one area where time really is the most valuable asset.
What’s changing for 2026/27?
A new tax year always brings rule changes, but 2026/27 has more than usual. If you're planning your finances at the start of the tax year rather than the end, you'll have time to adapt before any of these changes affect you.
Up 2 percentage points across all bands
Capped at £2.5m per person
Rises from 14% to 18%
In estate from April 2027
Dividend tax rates are going up
From 6 April 2026, dividend tax rises by 2 percentage points across the board. The basic rate moves from 8.75% to 10.75%. The higher rate goes from 33.75% to 35.75%. The additional rate stays at 39.35%.
What does that mean in practice? A company director taking a salary of £12,570 and £50,000 in dividends will pay roughly £1,000 more in tax this year than last. The dividend allowance is still just £500, so almost all of that income is taxable.
This is exactly the kind of change that rewards an early conversation. Sitting down with your accountant in April to review the split between salary, dividends, and employer pension contributions is one of the simplest ways to reduce the impact, and it only works if you do it before the year's decisions are already made.
Business property relief is being capped
Until now, business property relief and agricultural property relief have been uncapped. From April 2026, that changes. The 100% relief is now capped at a combined £2.5 million per individual, or £5 million for couples where the allowance transfers on first death. Above that, relief drops to 50% - creating an effective IHT rate of 20% on the excess.
AIM-listed shares get a different treatment entirely. They move to a flat 50% relief regardless of value. If you hold AIM shares as part of an IHT strategy, the maths has changed.
If you'd like to talk this through, our team can review how this affects your estate plan and what your options are.
Business Asset Disposal Relief rate is rising
The CGT rate for qualifying disposals under BADR rises from 14% to 18% from 6 April 2026. On a £1 million qualifying gain, that's an extra £40,000 in tax compared to last year's rate.
If you're thinking about selling or restructuring a business in the next few years, this is worth factoring in now.
Pensions and inheritance tax from April 2027
From April 2027, unused pension funds will form part of your estate for inheritance tax purposes. If you've been leaving your pension untouched as a way of passing wealth to the next generation, that strategy won't work in the same way going forward.
There are still options available, particularly around the order in which you draw from pensions versus other assets. This is something we're already helping clients think through at Vintage Wealth Management. The earlier you start the conversation, the more flexibility you'll have.
Looking ahead to April 2027: Tax rates on savings income and rental profits also rise by 2 percentage points, with the basic rate moving to 22%, the higher rate to 42%, and the additional rate to 47%. Maximising your ISA allowance in 2026/27 is one way to shelter future income from those higher rates.
How to keep your tax year planning on track
The difference between good personal tax planning and no planning at all usually comes down to rhythm. You don't need to think about your finances every week, but checking in once a quarter keeps things moving and avoids the March scramble.
| When | What to focus on |
|---|---|
| April – June | Review your income for the year ahead. Set up ISA and pension contributions early. If your income is near the £100,000 threshold, plan pension contributions now while projections are fresh. Check your dividend allowance position and agree a profit extraction strategy with your accountant for the year. |
| July – September | Check actual earnings against your projections and adjust contributions if needed. Review any capital gains and consider spreading disposals across tax years to use both years' £3,000 exemption. With the new dividend tax rates now in effect, this is a good time to check whether your salary and dividend mix is still working. |
| October – December | Watch for Budget announcements and any rule changes for the following April. Use your £3,000 annual gifting exemption if you haven't already. Start thinking about inheritance tax planning for the year ahead, especially with the pension and IHT changes arriving in April 2027. |
| January – March | Final top-ups to pensions and ISAs. Confirm nothing has been missed. If you've been planning through the year, this should feel calm rather than chaotic. |
The thread running through all of this is having a clear picture of your finances in one place. That's where cashflow modelling comes in. A good cashflow model maps out your income, expenditure, tax liabilities, and long-term goals together, so each quarterly decision is grounded in something real rather than a rough estimate.
Tax year planning works best when it starts early and stays consistent. If you'd like help building a plan for the year ahead, or you're curious about what cashflow modelling could look like for your situation, that's a conversation we have every day.
Get in touch-
The UK tax year runs from 6 April to 5 April the following year. The 2026/27 tax year begins on 6 April 2026 and ends on 5 April 2027. Most personal tax allowances reset on 6 April, and any unused allowances from the previous year are typically lost.
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The 60% tax trap affects anyone earning between £100,000 and £125,140. Your personal allowance is withdrawn at a rate of £1 for every £2 earned above £100,000, which creates an effective marginal tax rate of around 60% on that band of income. Pension contributions are the most common way to reduce your adjusted net income below the threshold.
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The pension annual allowance for 2026/27 is £60,000, or 100% of your UK earnings if lower. If you haven't used your full allowance in previous years, you can carry forward unused amounts from the last three tax years, potentially contributing well over £60,000 in a single year.
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The ISA allowance for 2026/27 is £20,000 per person. You can split this across cash ISAs and stocks and shares ISAs. The allowance cannot be carried forward, so any amount you don't use before 5 April 2027 is lost. From April 2027, the cash ISA allowance will drop to £12,000 for under-65s.
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If you've already accessed your pension flexibly, your annual allowance drops from £60,000 to £10,000. This is called the Money Purchase Annual Allowance (MPAA). Exceeding it triggers a tax charge, and unlike the standard annual allowance, unused MPAA cannot be carried forward.
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You can gift up to £3,000 per tax year under the annual exemption, and this amount falls immediately outside your estate for inheritance tax purposes. If you didn't use the previous year's exemption, you can carry it forward once, allowing up to £6,000 in a single year. Gifts above the annual exemption may still be free from IHT if you survive for seven years.
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Currently, pensions generally sit outside your estate for inheritance tax purposes. From April 2027, that changes. Unused pension funds will form part of your estate for IHT, which affects anyone who has been relying on their pension as a way to pass wealth to the next generation.
The information supplied is based upon our understanding of current UK law and HM Revenue and Customs (HMRC) practice. Tax law and HMRC practice may change from time to time. The value of any tax relief will depend on the individual circumstances of the investor.
Business Property Relief (BPR) is subject to HMRC rules and may change in the future. Qualification depends on individual circumstances and is not guaranteed. Investments that aim to qualify for BPR, such as shares in smaller or unlisted companies, carry higher risk and their value can fall as well as rise. Investors may not get back the full amount invested. BPR typically requires assets to be held for at least two years and relief will only apply if the qualifying conditions are met at the time of death.
Your capital is at risk – your investment can fall as well as rise in value so you could get back less than you invest. In addition, because AIM-listed companies tend to be smaller, more volatile and subject to less stringent checks than those quoted on the main London Stock Exchange, the risks are greater. The Financial Conduct Authority do not regulate tax planning or trusts.
The information contained within this communication does not constitute financial advice and is provided for general information purposes only. Links to related sites have been provided for information only. Their presence on this blog does not mean that the firm endorses any of the information, products or views published on these sites. No warranty, whether express or implied is given in relation to such information. Vintage Wealth Management or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.