Navigate The 3 Main Allowances To Make Use Of This Tax Year (2025/2026)

1) Your ISA Allowance

What is an ISA Allowance?

ISA stands for Individual Savings Account. Quite simply, it is a savings or investment account that you don’t pay income tax or capital gains tax on. Each year, the government sets an ISA allowance. This is the maximum amount you can save tax-free.

This allows you to keep more of your returns and access them in a more flexible way.

What is the ISA allowance for 2025/2026?

£20,000.   You don’t have to invest the full amount but whatever you don’t use is gone and can’t be carried over into the next financial year.

Can my ISA allowance be split?

Yes. You can subscribe to more than one type of ISA during the same tax year and invest amounts of your choice. However, the ISA allowance of £20,000 still applies whether your money is in one ISA or split across a few.

Are there any other ISA rules I should know?

Here are a few ISA rules that are helpful to be aware of:-

1. You can’t open an account with someone else. If you are a couple, you both get your own ISA allowance, meaning you can get up to £40,000 tax-free between you.
2. You can’t open an ISA on behalf of someone else, unless it is a Junior ISA. These are on behalf of a child who is under 16.
3. You can only subscribe to one of each type of ISA in any one tax year, for example one Cash ISA and one Stocks and Shares ISA. However, you can hold multiple ISAs that you have funded in previous years.
4. Once your money is inside an ISA, you can switch ISA providers and even the type you hold. This must follow set rules to avoid losing your entitlement and we can help show you the best options for maximising your ISA’s.

What about a Flexible ISA?

There is no minimum time that an ISA needs to be held for you to get the tax-free benefits.

If your ISA provider allows it, you can have full access to your money at any time. Withdrawing some doesn’t mean losing the tax benefits on the rest of your savings that remain within the ISA.

However, what happens after the money is withdrawn will depend on the type of ISA.

This is something we can help you navigate as part of your bespoke financial plan.

2) Your Pension Allowance

What is a Pension Allowance?

The Pension Annual Allowance is the maximum that you can pay into your pension each tax year, while still benefiting from tax relief. This includes pension contributions made by your employer or other third parties.

What is the Pension Allowance for 2025/2026?

It can be up to £60,000, however it depends on your circumstances – Factors like your income and whether you have accessed a pension previously.

The allowance covers all private pensions you hold, which would include both personal and work pensions.

What goes towards my annual allowance?

Any contributions you make into your pension pots count – Including you, your work or third parties.

As the amount you pay depends on various factors, it’s always best to get personalised advice to avoid any charges, and to ensure you’re getting the best possible return.

Can I carry forward my annual allowance?

Yes, unlike your ISA allowance, you can carry forward your pension allowance from the past three years. This is one of the many areas we look into when designing your bespoke financial plan, to ensure you are making the most out of all your entitlements.

To find out more about the best amount to pay into your pension, or to find out how it works when it comes to final salary pensions, get in touch and we’ll see how we can help.

3) Your Inheritance Tax (IHT) gifting allowance

What is IHT?

Inheritance Tax is paid by a person who inherits money, or property, from a person who has passed away. You don’t pay inheritance tax on gifts between spouses so long as you are legally married and UK residents.

There is also none to pay on any gifts to charities or political parties.

What is a gifting allowance?

This is where you can give away assets or money up to a total of £3,000 without them being added to the value of your estate.

What is the IHT gifting allowance for 2025/2025 and how does it work?

The gifting allowance is £3000. The way it works is if the value of your estate is likely to be above the threshold for IHT, you should consider using your IHT gifting allowance. Such a gift would be deemed immediately outside of your estate, thereby reducing the eventual bill.

What’s more, the limit applies per individual, so couples can gift up to £6,000 between them.

What counts as a gift?

There are various items that count as a gift, these are:-

• Money
• Household and personal goods – Furniture, jewellery, antiques, etc.
• A house, land or buildings.
• Stocks and shares listed on the London Stock Exchange
• Unlisted shares you held for less than 2 years before your death
• Any money you lose when you sell something for less than it’s worth. For example, if you sell your house to your child for less than its market value, the difference in value counts as a gift.

Can I carry forward my annual allowance?

Yes, you can for IHT allowance but only for one tax year, unlike pension allowance which is three.

To find out more about IHT and how best to maximise it, get in touch.

We hope that makes the announcements from the Spring Statement more clear and has given you a better idea about your annual entitlements and how best to use them.

If you’d like to learn more about the best ways to maximise these allowances, get in touch here ,and we can have a coffee and a chat.

Here’s to your journey to financial freedom.