Year End Tax Planning Guide: Private Clients (2025/26)

Accelerating dividend payments before 5 April 2026 may offer worthwhile tax savings, as the November 2025 Budget confirmed a 2 percent increase to the basic and higher dividend tax rates from 6 April 2026. Bringing distributions forward can help mitigate these higher rates, particularly for company owners and investors expecting sizeable dividends, though this should be balanced against cash‑flow needs and overall remuneration planning.

For owner-managed businesses, this change creates a limited window of opportunity to extract profits at the current, lower rates before the increase takes effect. Where sufficient retained earnings are available, declaring dividends prior to the deadline could reduce the overall personal tax burden for shareholders who would otherwise pay the higher rates in the 2026/27 tax year. The potential savings may be especially meaningful for higher-rate and additional-rate taxpayers, or for those planning a significant one-off distribution, such as in advance of a major purchase or investment.

Where property assets are jointly held between spouses, any income generated is treated as being split 50:50. A declaration of trust to split the beneficial interest in the income, supported by Form 17 to HMRC, can maximise tax efficiencies between couples. With the increase in tax rates associated with property income from 6 April 2027 by 2%, now is the right time to consider a restructure of your property interests.

Given the upcoming increase in tax rates associated with property income, set to rise by 2% from 6 April 2027, it is more important than ever for property owners to review their current arrangements. This change in tax legislation presents a timely opportunity to consider restructuring how your property interests are held and how income is distributed.

By taking proactive steps now—such as updating declarations of trust or reviewing ownership structures – couples can reduce potential tax liabilities and ensure their property portfolios are managed as efficiently as possible, both in terms of tax and legal ownership. Acting ahead of the 2027 changes allows you to plan strategically, minimise unnecessary taxation, and maintain flexibility for future financial planning.

Marriage allowance is a mechanism where one spouse has not fully utilised their personal allowance and the other has income within the basic rate band. Subject to eligibility, it is possible for one spouse to transfer 10% of their personal allowance to the other spouse.

Subject to eligibility criteria, the system allows the lower-earning spouse to transfer a portion of their unused personal allowance—specifically, up to 10%—to their higher-earning partner.

Example:

• John earns £12,000 per year. The personal allowance for the tax year is £12,570. John has £570 of his allowance unused.
• Jane, his spouse, earns £30,000 per year, which is within the basic rate tax band.
• John can transfer 10% of his personal allowance to Jane, which is £1,257 × 10% = £1,257.
• This means Jane’s taxable income is reduced by £1,257, lowering her income tax bill. At the basic 20% rate, this saves the couple approximately £251 in tax for the year (£1,257 × 20%).

Make Pension Contributions before the tax year end to obtain tax relief at your highest marginal rate.

Most individuals can contribute up to £60k into their pension without an income tax charge. It’s possible to look back to the three prior tax years (so to 2022/2023 onwards) for any unused pension allowances to bolster the contribution in this current tax year. Any allowance available from 2022/2023 not used in this year will be lost after 5 April 2026.

Pension contributions made by those earning £100k or over, provides an opportunity to reinstate personal allowances.

Those earning over £60k who claim child benefit also have an opportunity to make a pension contribution in order to preserve their entitlement.

It is important to take advice on contribution levels so that you do not exceed your annual allowance and create an income tax charge.

Gift Aid contributions offer significant advantages, not just for the charity receiving the donation, but also for the donor. When a taxpayer makes a Gift Aid donation, it allows the charity to reclaim basic rate tax on the contribution, which increases the overall value of the gift. For higher-rate or additional-rate taxpayers, Gift Aid also provides personal tax relief, reducing the amount of income tax owed and potentially increasing the overall financial benefit to the donor.

In addition to boosting the value of charitable donations, Gift Aid can influence other areas of personal finance. For example, it can impact entitlement to child benefit and help in reinstating a taxpayer’s personal allowance, which may otherwise be reduced due to high income. This makes Gift Aid a powerful tool for both charitable giving and tax planning.

To illustrate, consider a 45% taxpayer who donates £80 to a registered charity. The donor would be entitled to £25 in tax relief, effectively reducing the cost of the donation. At the same time, the charity can reclaim £20 in basic rate tax, increasing the total benefit received from the gift. This combined effect ensures that charitable contributions are more impactful and financially efficient for both the donor and the charity.

Exchanging salary for benefits can have tax advantages. It involves exchanging part of your salary (commonly called salary-sacrifice) for certain benefits. Some common examples include sacrificing pay for additional holidays, pension contributions, cycle to work scheme and childcare vouchers.

For instance, contributing into a pension via salary sacrifice saves income tax and NIC. Higher rate and additional rate taxpayers obtain the tax relief immediately and do not need to reclaim the relief through their self assessment tax return, which can delay the relief by several months. There is also the added benefit of saving NIC.

Salary sacrifice allows employees to receive non-cash perks that can improve their overall compensation package, while potentially reducing their taxable income.