A new year has a way of focusing the mind on your finances.
Perhaps you’ve been meaning to review your pension for months?
Maybe you’ve got an ISA you haven’t looked at since you opened it?
Or, you might just be more aware that you could be doing more to keep your tax bill down, but you haven’t quite got round to it yet.
The good news is that 2026 gives you a fresh opportunity to get things in order. The earlier you start, the better placed you’ll be. This isn’t just about the 2025/26 tax year deadline coming up in April. It’s about making smart, tax-efficient decisions across the whole of the year ahead.
Here’s a practical checklist to get you started.
Why tax efficiency matters more than you might think
When people hear the phrase ‘tax planning’, they often assume it’s something reserved for high earners or people with complex financial affairs. In reality, it’s relevant to almost anyone with a pension, savings, property or investments, which covers a lot of Leicester residents.
Many people pay more tax than they need to, not because they’ve done anything wrong, but because they haven’t reviewed their arrangements for a while.
Tax rules change, allowances are updated, and financial circumstances evolve. What was the right approach two or three years ago might not be the most efficient approach today.
Working through our checklist below is a good starting point for 2026.
Step one: review how your pensions, ISAs and investments are performing
Before you make any new financial decisions, it’s worth taking stock of what you already have.
That means looking at all your pension pots, including any older pensions from previous employers that might have been ticking along quietly in the background. Many Leicester residents have two, three or more pension pots scattered across different providers, and it’s surprisingly easy to lose track of how they’re performing.
Check what charges you’re paying, what your money is invested in and whether the investment strategy still makes sense for your age and retirement timeline. A pension that was set up with a default investment option a decade ago may not be working as hard as it could be now.
The same applies to ISAs and any other investments. Review their performance. Consider whether the underlying investments are still appropriate. And think about whether it might make sense to consolidate anything.
While you’re doing this, it’s also worth checking the beneficiary nominations on your pension plans. Pensions sit outside your estate for Inheritance Tax purposes, so making sure the right people are named as beneficiaries is a simple but important step that’s often overlooked.
Make the most of your pension contributions before 5 April
One of the most tax-efficient things you can do before the end of the 2025/26 tax year is to maximise your pension contributions, and you have until 5 April to do it.
Pension contributions attract tax relief at your marginal rate of tax. For basic rate taxpayers, that means a £100 contribution only costs you £80, because the Government tops it up with £20 of tax relief. For higher-rate taxpayers, the effective cost could be as little as £60 once higher-rate relief is claimed.
The annual allowance, the maximum you can contribute to pensions in a tax year while still receiving tax relief, is currently £60,000, or 100% of your earnings if that’s lower. But it’s also worth knowing that you may be able to carry forward unused allowances from the previous three tax years, potentially allowing you to make a larger contribution than you might have expected.
To put this in simple terms, a higher-rate taxpayer contributing £10,000 into their pension could effectively do so at a net cost of just £6,000 after tax relief. That’s a significant benefit that’s available to anyone with the earnings to support it.
If you’re employed, check whether your employer offers a salary sacrifice option, which can make your pension contributions even more tax-efficient. And if you’re self-employed, making pension contributions before 5 April is one of the most effective ways to reduce your tax bill.
Don’t leave it to the last minute. Processing any contributions can take time, and you’ll want to be confident they land in the right tax year.
Fill up your ISA allowance
Every adult in the UK currently has an annual ISA allowance of £20,000, which resets on 6 April each year. Any unused allowance doesn’t carry forward, so if you don’t use it, you lose it.
Unlike pension contributions, ISAs don’t give you upfront tax relief. However, all the growth and income within an ISA is completely free from Income Tax and Capital Gains Tax. That tax-free shelter can add up to a considerable sum over many years of saving and investing.
If you have a stocks and shares ISA, it also has the potential to grow significantly more than a cash ISA over the longer term, making it a powerful vehicle for building tax-free wealth. Cash ISAs still have a role to play, particularly for money you might need in the shorter term or for more cautious savers.
If you have children, the junior ISA allowance is £9,000 per year, a straightforward way to build a tax-free pot for them over time.
With the new tax year starting in April, now’s a good time to think about how much of your 2025/26 allowance you’ve used and whether you can top it up before the deadline. It’s also worth noting that the Cash ISA allowance for under-65s is set to come down to just £12,000 in 2027, so you have just over a year to make the most of your current £20,000 allowance.
Think about gifts and helping family from your surplus income
For many Leicester residents, one of the goals of careful financial planning is being able to help their family, whether that’s contributing towards a grandchild’s education, helping a child onto the property ladder or supporting a loved one who needs a financial hand.
The good news is that the tax rules allow for some meaningful gifting, provided you understand the framework.
Everyone has an annual gift exemption of £3,000, which falls outside your estate for Inheritance Tax (IHT) purposes. You can also give small gifts of up to £250 to any number of individuals, and there are specific exemptions for wedding gifts.
One of the most useful but lesser-known rules is the ‘normal expenditure out of income’ exemption. If you make regular gifts from your surplus income (money you don’t need to maintain your own standard of living), these gifts can be free from IHT, with no upper limit. This can be a particularly effective strategy for retirees with pension income that exceeds their day-to-day needs.
A financial adviser can help you document these gifts correctly, which is important if you need to evidence the exemption later.
Don’t overlook Capital Gains Tax and other liabilities
Capital Gains Tax planning has become increasingly important following recent changes to rates and the continued reduction of the annual exempt amount, which now stands at just £3,000.
If you hold investments outside of your ISAs and pensions, whether that’s shares, funds or a second property, it’s worth reviewing your position carefully. The timing of any disposals can make a real difference to the tax you pay. In some cases, it may make sense to spread the gains across two tax years or to use losses to offset gains elsewhere.
Couples can also make use of both partners’ annual exempt amounts and Capital Gains Tax allowances, which is worth considering when reviewing jointly held assets.
This is an area where the decisions are very personal and the rules can interact in complex ways. Getting professional financial advice before making any significant disposals is time well spent.
How BDWM can help
Tax efficiency isn’t a one-off exercise. It’s something that benefits from regular attention throughout the year.
Whether you want to make the most of this year’s pension and ISA allowances before April, review the performance of your existing arrangements, plan some gifting or get to grips with a potential Capital Gains Tax liability, our team of advisers in Leicester is here to help.
We’ll take the time to understand your situation properly and give you practical, personalised advice, tailored to your circumstances and goals.
To arrange a no-obligation consultation, get in touch with us today. There’s no better time to make your money work harder.