Many of us love to work to a deadline, but when it comes to maximising your tax allowances each tax year, it isn’t a great strategy to leave it until the last minute to mop them up. If you want to maximise allowances, you have up to 12 months to do so by starting as soon as you can, and this can also make it possible for those with less disposable income to see greater benefits.
As the income tax thresholds have been frozen for another year, you need to make the most of the tax allowances you do have, especially as many of them are set to reduce in coming tax years.
Rachael Griffin, tax and financial planning expert at Quilter, said: “This is a year to use the allowances you can, but the bigger task is getting ready for the major structural shifts arriving in 2027. Cash ISA limits will be cut for under‑65s and savings income will be taxed more heavily, while unused pensions will fall within inheritance tax (IHT), so households need to… prepare for a very different tax landscape.”
For example, if you start your saving into your Individual Savings Account (ISA) as soon as you can, you have more time to use the full £20,000 allowance. You could put up to £1,666 per month into an ISA to build up to the full £20,000 over 12 months. This might be easier for some people than finding the full £20,000 in one go and can also boost your savings over time.
The two extremes of ISA investing were evident at one of the world’s largest investment management firms on April 5 and then April 6 this year. The final investor of the 2025/26 tax year invested via the Fidelity International platform with just 20 minutes to go at 23:40 of April 5. While the first investor of this tax year put money into their ISA within the first hour of April 6.
Fidelity has also calculated that by using your ISA allowance early, you benefit more, as you can see from the table below. Early Shirley, who has invested the full allowance for the last 10 years as soon as possible, has the largest pot at £321,570. Monthly Monty, who puts in the full amount allowed each month, has £303,625 – ahead of Last-Minute Lara who invests at the end of the tax year, and has £299,385. The difference between Early Shirley and Last-Minute Lara is a whopping £22,185 over 10 years.
Returns generated after 10 years of investing the maximum ISA allowance
| Investor | Total contributions | Final pot |
| Early Shirley | £185,480 | £321,570 |
| Monthly Monty | £185,480 | £303,625 |
| Last-Minute Lara | £185,480 | £299,385 |
Source: Datastream, Fidelity International, 05/04/2016-06/04/2026. Total return in GBP of FTSE All Share. For illustrative purposes only
What else should be considered now?
Topping up your pension is one thing you should try to do early in the new tax year. You can put up to £60,000 a year, or 100% of your earnings, whichever is lower, into your pension each year and receive tax relief.
If you haven’t used up your full allowance for previous years, you can add more into your pension pot by using what are known as “carry forward” rules. This has an additional benefit of reducing your tax bill, while boosting your long-term retirement plans, but you should speak to your accountant before actioning this.
You can also gift up to £3,000 a year free of IHT, said Ms Griffin, or £6,000 jointly for a married couple or civil partners. If you didn’t use the allowance for the last tax year, then you can gift as much as £12,000 as a couple in this tax year.
One major change to be aware of this tax year is the requirement for some taxpayers to do ‘digital reporting’ to HMRC. From April 6, you are required to submit quarterly updates under new reporting rules if you are self-employed or a landlord earning over £50,000. Even though there are no penalties for missing a filing this year, it is sensible to get used to how the system works to make sure you don’t get caught out later by errors, or penalties, which will apply from January 31, 2027, if the last return of the year is late.
Let us help you
If you are interested in seeing how you can use your tax allowances earlier in the tax year, or need more information about digital reporting, then please get in touch with us and we will do what we can to help you.
Disclaimer:
This article is for general information only and includes commentary from third-party sources. While care has been taken to ensure accuracy based on current HMRC and GOV.UK guidance, some forward-looking statements reflect industry commentary and may be subject to change. Tax rules, thresholds and allowances can vary depending on individual circumstances and future government policy.
RMC Accountants does not provide financial or legal advice. Readers should refer to official GOV.UK guidance or seek professional advice before taking any action.