Aberdeen Adviser highlights pension, CGT and Estate Planning considerations ahead of Tax Year End

Financial advisers may wish to review how pension contributions, investment gains and estate planning strategies interact for clients ahead of the end of the tax year, as frozen income tax thresholds and reduced capital gains tax allowances continue to tighten the UK tax landscape.

Aberdeen Adviser is highlighting a number of pension, capital gains tax and estate planning considerations for advisers to discuss with clients before the 2025 to 2026 tax year closes, noting that planning decisions in one area can increasingly influence outcomes elsewhere.

Andrew Zanelli, Head of Technical Engagement at Aberdeen Adviser, said the interaction between different parts of the tax system means Tax Year End planning has become more nuanced.

“Tax Year End planning has always been important, but the environment is becoming more complex. Frozen income tax bands, reduced capital gains allowances and evolving inheritance tax rules mean decisions in one area can affect outcomes elsewhere.

“A pension contribution might reduce taxable income, help retain child benefit and potentially change the rate applied to capital gains in the same year. Understanding how those pieces fit together is where professional advice adds real value.”

Pension contributions remain a key planning tool

Pensions continue to play a central role in tax year-end discussions. The annual allowance currently stands at £60,000, and individuals may also be able to carry forward unused allowances from the previous three tax years, allowing significantly larger contributions in some circumstances. 

Pension contributions can also influence several tax thresholds because they extend the basic and higher rate tax bands by the gross amount paid. This can help advisers manage the impact of frozen income tax thresholds. 

In some cases, pension funding can also restore allowances that have been withdrawn as income rises. The personal allowance begins to taper once adjusted net income exceeds £100,000 and disappears entirely at £125,140. Contributions that bring income back within those thresholds can therefore produce a significantly higher effective rate of tax relief. 

Pension contributions may also help households retain the child benefit, which is gradually withdrawn once the highest earner’s income exceeds £60,000. 

Zanelli said the combination of tax relief and tax efficient investment growth means pensions remain an important part of long term financial planning.

“Tax relief at someone’s marginal rate, alongside investment growth free from income tax and capital gains tax within the pension wrapper, means pensions continue to play a significant role in retirement and tax planning.”

Capital gains tax allowances now more limited

Advisers may also wish to review potential capital gains before the Tax Year Ends.

The capital gains tax annual exemption now stands at £3,000, which means investment disposals that previously fell within the allowance are now more likely to generate a tax liability. 

Gains above the allowance are taxed at 18 per cent for basic rate taxpayers, and 24 per cent for higher rate taxpayers, meaning careful use of the exemption can still reduce the tax payable on disposals. 

Planning around gains may also require careful consideration of losses. Losses realised in the same tax year must normally be offset against gains before the annual exemption can be used, which can affect how effectively the allowance is utilised. 

Couples may also be able to use both partners’ exemptions by transferring assets between spouses or civil partners before disposal, as these transfers normally take place on a no gain, no loss basis.

Estate planning discussions increasingly include trusts

Tax Year End reviews can also prompt wider estate planning discussions.

Inheritance tax receipts have more than doubled over the past decade to around £7.5 billion, bringing more families into the scope of estate planning and increasing demand for advice on how wealth is passed between generations.

At the same time, the planned inclusion of inherited pension funds within the inheritance tax net from 2027 is prompting advisers and clients to review how pensions, investments and estates interact within longer-term planning. 

Trusts can play a role in these discussions because they allow assets to be transferred out of an estate while still maintaining a degree of control over how wealth is managed and distributed. 

Interest among advisers remains strong. Discretionary trusts were the most viewed topic on Aberdeen’s Techzone technical hub in 2025, reflecting the level of adviser engagement with trust planning in practice. 

Joined up planning increasingly important

Zanelli said the interaction between pensions, investments and estate planning reinforces the importance of a joined-up planning approach.

“Many financial planning decisions are closely connected. A pension contribution can influence income tax, capital gains tax and even estate planning outcomes.

“That is why taking a holistic view of a client’s financial position remains essential, particularly as tax rules evolve and allowances become more constrained.”