Small decisions made or missed before April can have a lasting impact on tax bills, AJ Bell has warned ahead of the tax year’s end.
Laura Suter, director of personal finance at AJ Bell, said: “From savings interest and ISAs to pensions, investments and family finances, small decisions made – or missed – before April can have a lasting impact on your tax bill.”
The end of the tax year represents a hard deadline for using annual allowances. Most cannot be carried forward, meaning unused relief is permanently lost after 6 April, so below Suter highlights 10 mistakes to avoid.
1. Assuming savings interest remains tax-free
Many savers believe their interest escapes taxation, unaware that tax is eroding returns, and the government expects 2.64 million people will tax on their savings this tax year.
Basic-rate taxpayers can earn £1,000 of savings interest annually before paying tax under the tax-free Personal Savings Allowance, while higher-rate taxpayers face a £500 limit and additional-rate taxpayers receive no allowance. Rising interest rates mean millions now exceed these limits, whilst frozen thresholds push more people into higher tax bands. From April, tax on savings interest will increase further.
A saver earning 4.5% needs just £22,200 before hitting the tax-free limit as a basic-rate taxpayer, or £11,100 as a higher-rate taxpayer.
“Savers can move their money into a cash ISA and protect any interest from tax, or potentially benefit even further by moving that money into a stocks and shares ISA,” Suter said.
2. Letting ISA allowances go unused
ISA allowances operate strictly on a ‘use-it-or-lose-it’ basis. Failing to use the £20,000 allowance before 6 April means permanently forfeiting tax-free protection, potentially costing thousands in future tax on interest, dividends and gains.
Each individual can put £20,000 tax-free into an ISA, meaning couples can shelter £40,000 before April. Children receive £9,000 annually. The limit spans all account types.
3. Ignoring pension top-ups
Missing pension contributions before year-end means forfeiting immediate tax relief, which is particularly costly for higher-rate taxpayers where every £1 in a pension can cost as little as 60p.
Basic-rate taxpayers receive 20% tax relief, whilst higher and additional rate taxpayers can reclaim an extra 20% or 25% through online claims or tax returns.
“For some, a small contribution could also prevent them falling into a tax trap,” Suter said. “If you’re close to an earnings threshold that means you’ll lose some tax breaks or government support, such as for childcare, you can contribute to your pension to reduce your effective income, and once again be eligible for the tax break or perk.”
4. Forgetting to bank capital gains
The capital gains tax burden has escalated through cuts to the tax-free allowance and rate increases over the year. The allowance now stands at £3,000 per person, with basic-rate taxpayers paying 18% on gains and higher and additional rate payers facing 24%.
“If you have gains outside an ISA, you could realise the gains up to the annual £3,000 limit and move that money into your ISA – this process is known as a ‘Bed and ISA’,” Suter said.
Investors can also transfer assets to spouses or deploy investment losses to offset gains.
5. Overlooking dividend tax on modest portfolios
The dividend allowance has contracted to just £500, with tax rates set to increase from April. Rates will rise to 10.75% for basic-rate taxpayers and 35.75% for higher rate taxpayers.
“Many investors wrongly assume dividend tax only applies to large portfolios, but even relatively modest holdings can now generate a tax bill if they sit outside an ISA or pension,” Suter said.
A portfolio yielding 5% requires just £10,000 before hitting the limit but investors can use a ‘Bed and ISA’ to transfer dividend-paying investments into ISAs.
6. Falling into frozen-threshold tax traps
Pay rises can quietly push earners over key thresholds, reducing allowances or eliminating benefits such as child benefit or tax-free childcare. Failing to assess income position before April could mean losing thousands in support.
Parents face particular exposure at the £100,000 threshold, where tax-free childcare and funded hours disappear. Child benefit tapers from £60,000 and vanishes at £80,000. Moving into the higher-rate tax bracket halves the Personal Savings Allowance and triggers higher dividend tax rates.
“A small pension contribution could reduce your taxable income below these thresholds,” Suter explained.
7. Keeping assets in the higher-earning partner's name
Couples who fail to share assets often pay more tax than necessary. Not utilising a lower-earning partner’s allowances, ISA limits or tax bands results in avoidable tax on savings, dividends and capital gains.
If one partner earns less, transferring savings or investments into their name allows the couple to pay lower tax rates, Suter noted. Where one partner has not used their ISA, pension, Personal Savings Allowance or CGT exemption, moving assets can maximise available tax breaks.
8. Missing out on tax-free growth for children
Not using Junior ISAs or Junior SIPPs means forfeiting both tax-free growth and, for pensions, automatic tax relief. Over time, this can cost families tens of thousands in lost compound growth.
Junior ISAs allow savings of up to £9,000 per child annually, with funds growing tax-free until age 18. Junior SIPPs permit contributions of up to £2,880 per year, with government relief increasing this to £3,600, though funds remain locked until at least age 57.
“Someone who is able to put away the full £9,000 Junior ISA allowance each year, earning the same 5% return a year, could have £52,200 after five years or £266,000 after the full 18 years,” Suter said.
9. Forgetting to use inheritance tax gifting allowances
Failing to use annual gifting allowances means more of an estate could face inheritance tax later. Pensions will be pulled into the inheritance tax net from April 2027, bringing more estates into the charge.
Every individual can gift up to £3,000 per year free of IHT, with unused allowances carried forward one year. Couples can combine allowances to give away £6,000 tax-free annually.
Extra allowances apply for wedding gifts: £5,000 from parents, £2,500 from grandparents and £1,000 from others. Small gifts of up to £250 per person are also exempt.
“The most generous exemption is for gifts made from regular income, which can be unlimited if they don’t reduce the donor’s standard of living,”. Suter added. “If you haven’t used up your annual gifting amounts, it’s a good idea to consider it before the end of the tax year.”
10. Treating tax planning as an annual scramble
Leaving everything until the last minutes means savers are more likely to rush decision, miss allowances and make mistakes, while savers who fail to automate contributions often under-use their tax shelters year after year.
“It's a good idea to set your finances at the start of the tax year, working out what you can afford to contribute to ISAs and pensions, and then start automating it,” Suter finished.
“You can make sure you’re claiming the government allowances you’re eligible for and can work out what you want to gift, if applicable. You can then check in mid-year if you’re on track and factor in any changes to finances.”