With tax year-end fast approaching, now is the time for advisers to help clients maximise allowances, optimise tax efficiency, and avoid last-minute pressures. Focusing on pensions can ensure clients make the most of their available opportunities. Because if you don’t use it, you lose it.
Use it or lose tax planning allowances:
| Value | Allowance |
| £12,570 | Personal Allowance |
| £3,000 | CGT allowance |
| £1,000 | Savings allowance |
| £500 | Dividend allowance |
This means it is possible to receive £17,070 of tax-free income in both 2024/25 and 2025/26.
In addition, one should look to utilise retail savings allowances before they are lost.
Through auto-enrolment many of us are already saving in a pension. There is no limit on how much can be saved in a pension but there is a restriction on the tax relief available.
UK resident aged under 75 can receive tax relief on your contributions to a registered pension scheme, to whichever is the higher of:
- 100% of your UK taxable earnings, subject to a maximum of £60,000
- £3,600 if no taxable earnings.
The £60,000 may be reduced for higher and additional rate taxpayers through tapering and for those who have crystallised their benefits through the money purchase annual allowance. In both cases the allowance can reduce to £10,000.
Advisers should remember that COBS requires them to consider both a stakeholder pension plan and any workplace schemes open to saver before recommending any other type of pension.
The pension market currently consists of:
| Number | Pension Type |
| 3 | Stakeholder |
| 56 | Workplace |
| 29 | Personal pension plan (PPP) |
| 92 | Self-invested personal pension (SIPP) |
| 38 | Small self-administered scheme (SSAS) |
| 4 | Trustee investment plan (TIP) |
£20,000 can also be saved in ISAs. There are also junior ISAs available, although these are restricted to £9,000 being added each financial year. There is no shortage of options, indeed Defaqto reports on:
| Number | ISA Type |
| 581 | Cash |
| 164 | Investment |
| 24 | Junior Investment |
| 7 | Lifetime Cash |
| 18 | Lifetime Investment |
Mark O’Donnell, Insight Manager – Investments at Defaqto, highlights some of the opportunities to consider with SEIS/EIS and VCTs:
Outside of the deadline for ISAs the tax year end is also important for investors looking to go into SEIS/EIS and VCTs. There is an annual allowance of £200,000 that can be invested in SEIS qualifying investments and VCTs, which allow for income tax relief for that tax year, with SEIS investments providing up to 50% income tax relief, and VCTs up to 30%, along with other tax advantages. EIS offers allow for a much larger allocation, with investors able to claim EIS reliefs on up to £2 million a year and again providing a 30% income tax relief for investors. For EIS and SEIS investments, there is also the ability to carry back the relief to the previous tax year too.
For income tax relief purposes, it is the date that the investment is made, rather than the commitment to invest into an EIS offer. While some EIS offers will still be able to deploy any funds raised by the tax-year end, others have a longer deployment time scale. MICAP has a filter to show which offers will still be able to deploy funds this tax year which is helpful as tax year end approaches. Some EIS managers also offer HMRC approved knowledge intensive funds. For these knowledge intensive funds it is the date the fund closes (usually a day or two before tax year end) that is taken as the date of investment from an income tax relief perspective. MICAP currently has data on 68 SEIS/EIS offers, of which 31 are either a knowledge intensive fund or are currently still able to deploy funds in this tax year. In addition, there are currently 31 open VCTs, though this is also a moving target as a couple of VCTs are still to open this tax year for a new fundraise and some may reach their fundraise limit and close to further investors, with several already closed. As well as income tax relief, any gains from a client’s SEIS, EIS or VCT investments are free from capital gains tax, with VCTs providing tax free dividends as well. With most mature VCTs targeting a 5% dividend this could provide a useful tax-free income for investors.
Darren Winfield, Insight Consultant at Defaqto, highlights the ISAs, Stocks and Shares ISAs and Platform ISAs/DWMs available:
As of February 2025, the UK government has announced that the annual Individual Savings Account (ISA) allowance will remain at £20,000 until April 2030. This freeze applies to all ISA types, including Cash ISAs and Stocks and Shares ISAs.
The Lifetime ISA allowance is also frozen at £4,000 per year until 2030.
The Junior ISA and Child Trust Fund allowances are set at £9,000 annually and will remain unchanged during this period.
The previously proposed “British ISA,” which would have provided an additional £5,000 tax-free allowance for UK equities, has been scrapped by the government.
While the ISA allowances are frozen, other tax changes have been implemented. Notably, the annual tax-exempt allowance for capital gains tax has been reduced from £12,300 in 2022 to £3,000, affecting those with investments outside of ISAs. Given these developments, it is advisable for investors to maximize their ISA contributions to benefit from tax-free growth and income, especially in light of the reduced capital gains tax allowance.
At Defaqto we have seen from our data the continued use of platform exclusive ISA products by financial advisers with 82% of adviser platforms offering them but Digital Wealth Management /Robo advisers are aggressively competing in this marketplace with lost cost ETF ‘s and some heavyweight advertising to capture the Gen Z market.
