8 tips to maximise the tax efficiency for your savings and investments this tax year

The dust may have settled on the 2024/25 tax year but rather than sit back and put any important financial decisions on the backburner, now is the time to get serious about your financial affairs. With 11 months left until the end of the 2025/26 financial year, ensuring your financial affairs are not only in order but that your savings and investments are as tax efficient as possible could save you significant stress further down the line. 

Why does tax-efficient saving matter? 

Savers are under increasing pressure. The UK tax burden is estimated to be at the highest since the Second World War and with most personal allowances on pause until at least 2028, an increasing proportion of an individual’s income gets swallowed up by tax as their earnings increase. Add in savage cuts to the Dividend Allowance and the Capital Gains Tax exemption in recent years, along with the Autumn Statement hike in the rate of Capital Gains Tax - to 24% for higher rate taxpayers and 18% for basic rate taxpayers (from 20% and 10% previously) and those with investments held outside of a tax-wrapper are more likely than ever of paying tax on their returns. 

The Autumn Budget announcement that unused pension assets will be included in inheritance tax (IHT) liabilities from April 6 2027, was a major blow for those hoping to pass on wealth to their loved ones. Plus, ‘reforms’ to ISAs are also on the cards. As trailed by the Government in the Spring Statement, Chancellor Rachel Reeves is mulling over how to achieve the right balance ‘between cash and equities’ to earn better returns for savers. This means savers might want to get ahead to ensure they can maximise existing rules while they are still in place. 

Here are eight tips to consider if you’re looking to get your tax affairs in the best possible shape now and avoid a headache further down the line.

1. Set up a Direct Debit to utilise your £20,000 tax-free ISA allowance  

Your ISA allowance remains at £20,000 this tax year (2025/26) despite the news that reforms may be on the way. Tax treatment could even be subject to change. Remember any changes, such as a rumoured cap on the amount of cash savers can hold in an ISA, are likely to require a consultation process so it might take some time to come into force though be prepared for a surprise.

While the surge in Cash ISA deposits in March (up £4.2 billion – an uplift of almost a third on March 2024*) was typical of this kind of year, it might indicate that some people were not only trying to improve the tax efficiency of their savings but were also trying to get ahead of any changes to the Cash ISA allowance. It might not only be the Cash ISA allowance that comes under the microscope. The Government needs to find a way to deliver on its pledge to boost economic growth, which is why the way we invest in Stocks & Shares could also be vulnerable to ‘reform’.  

It is important to remember that nothing has changed yet, and while some might assume the Government would time the implementation date of changes for the start of a new tax year, it could happen sooner. With the road ahead unclear, it might be worth considering using as much of the current allowance as possible earlier in the tax year when the money can grow free of tax on income and capital gains, allowing investors to hold onto to more of their savings.

Remember, the ISA allowance is a use it or lose it allowance, so while you have until midnight on April 5 2026, to utilise it, getting ahead can help prevent paying tax on investments held outside of a tax wrapper or on cash held in a regular bank or building society that could place people at risk of breaching their personal savings allowance**.  

Research conducted by our parent company, Evelyn Partners, has shown that someone who consistently invests their full ISA allowance at the very start of the tax year will see their portfolio grow more substantially over 30 years than those that delay making contributions until later as assets have longer to take advantage of the compounding effect of making returns on the growth they experience, not just the original amount invested. This does, of course, depend on the investments selected and market timing. While investments can go up in value they can also go down and you may not get back the amount invested. 

An example to illustrate this… 

Let’s say Investor A invests £20,000 at the start of the tax year on April 6 and stuck to that strategy for 30 years. They would accumulate a pot of £1,395,216 by 2055 – that's more than £66,000 more than Investor B who secures £1,328,777 after contributing money to their ISA at the end of the financial year. This assumes that investor A and B both were to get an annual investment return of 5% after fees. 

Some Bestinvest early birds were ultra keen to take advantage of such a move. The first person to max out their ISA allowance in full for the new tax year did so 11 minutes into the new tax year on April 6 this year. Of course, not everyone has a spare £20,000 to add to a Stocks & Shares ISA but even those who find they have small amount to invest through the year can make contributions either on an ad hoc basis or through a regular monthly direct debit. 

Investing a set amount each month takes advantage of pound-cost averaging, so rather than investing a lump sum at a single price point, investors can buy smaller amounts at regular intervals no matter what the price is at the time. This approach can help cushion the effects of market volatility over the short- to medium-term and something to consider during times of global economic and market uncertainty such as we are currently in.

2. Get to grips with your tax affairs by downloading HMRC’s app 

Many people don’t have a clue how much tax they paid last year, what their state pension forecast is, what their tax code is or even what their National Insurance number is. All this key information and more is easily accessible on the free HMRC app. Downloading the app offers a secure and quick way to access your Personal Tax Account and action everyday tax and benefits tasks, in turn gaining a greater oversight of your finances and avoiding busy HMRC phone lines and web chats.  

App users can use it to store their National Insurance number somewhere safe such as an Apple or Google wallet, edit their address when they move, update how HMRC contacts them – by post or online – or change their name if they get married. Other key information available on it includes your tax code (more on that later), employment and income history from the previous five years, an annual tax summary and more. It is ultra useful for savers and investors to stay on top of their tax affairs, particularly for those with multiple sources of income or who are at risk of tipping into a higher tax bracket and might want to explore ways to reduce their income tax liability.   

Users can also check their state pension entitlement to check for any gaps in their record. While the deadline to plug gaps all the way back to 2006 has now passed, there is still an option to pay for missing years over the past six years. The App also allows users to complete their self-assessment tax return, check what benefits they might be entitled to, such as Child Benefit, and apply for the marriage allowance - where the higher earner in a married couple where neither is a higher rate taxpayer can transfer a portion of their personal allowance to their lower or non-earning earning spouse or civil partner - to reduce their tax liability, if they are eligible.  

3. Check your tax code – you may be paying more tax than you need to  

It might appear like an insignificant series of numbers and letters on your pay slip, but your tax code is used by employers and pension providers to calculate how much tax to deduct from your wages or pension. If it’s incorrect - more commonplace than you might think - you could be paying more tax than needed though, be warned, you can also end up with a tax debt from paying too little as well.  It is your job to ensure your tax code is correct, not your employer’s or HMRC’s, which is why checking it at key stages through the tax year is important. 

Tax code errors can occur if you earn money from more than one source, such as a part-time job, receive rental income from a property, change jobs or have recently retired. They can also happen when you file your tax return as technical glitches can lead to inaccuracies that could cause a major headache.  

The beginning of a new financial year is a good time to check. Those who have overpaid can receive an instant rebate in their next salary payment. If you owe HMRC tax, checking early in the financial year makes sense as any extra payments can be spread over a longer period. Leaving it until later in the tax year might mean HMRC has to take larger chunks from your pay to make up any shortfall – something that could derail savings plans in the run up to the end of the tax year. If you feel you are paying too much or too little, you can adjust your tax code directly through your Personal Tax Account either through the HMRC app or online.   

4. File your self-assessment tax return now to avoid a big bill at the start of 2026 

Most UK taxpayers don’t need to file a tax return for the 2024/25 tax year because tax is automatically deducted from their wages (known as Pay-As-You-Earn, or PAYE), pensions or savings. For those who don’t have tax automatically deducted or have earned extra untaxed income, such as from property, or need to claim higher or additional tax relief on pension contributions, (as well as have made subscriptions to schemes such as Venture Capital Trusts and Enterprise Investment Schemes) or have another qualifying reason, then filing a tax return is mandatory.  

The deadline to file a paper return is October 31 2025, but most people file online and while that gives them more time to get their affairs in order, as the deadline is January 31 2026, getting that return finished early can be an effective way to keep a personal budget on track particularly if you have a large tax bill to pay. No one wants to be hit with a large tax bill at the end of January, just weeks after the extra expense that comes with the festive period. Worse still, missing your tax return deadline now comes with even heftier penalties for some taxpayers – a good reason to get the self-assessment process done ASAP.  

There’s another bonus for getting the hard work done now. If you have tax to pay, you can spread the payments over the next nine months to make them more manageable. So rather than paying a lump sum in one go, you can drip them in slowly to ensure your cashflow does not get impacted in a single month.  

While HMRC is changing the way landlords and sole traders file their income and expenses, with people expected to submit the information every three months under the Government’s Making Tax Digital for Income Tax scheme, that won’t apply this tax year. The changes are being rolled out slowly: landlords and the self-employed with a total annual income from employment or property, or both, of above £50,000 from must make quarterly submissions from April 2026 in addition to their Self-Assessment tax return. Those with qualifying income above £30,000 must use it from April 2027 and it’s a start date of April 2028 for those with income above £20,000. 

5. Top up your pension to slash your income tax bill  

Unused Defined Contribution pensions may be coming under the scope of Inheritance tax (IHT) from April 2027 but that should not deter younger savers from taking advantage of the benefits that come with starting to build up a healthy retirement pot now. 

Topping up a pension could not only boost retirement income in the future but also slashes your income tax bill today because contributions up to your pension annual allowance attract tax relief at your marginal rate. Basic rate taxpayers have 20% in tax relief added to their pot with each contribution while those on the higher 40% and 45% tax rates can respectively claim a further 20% and 25% off their tax bill for the year (different tax rates apply in Scotland).  

While there is income tax to pay when you eventually come to withdraw your pension pot, bar the ability to take out 25% tax-free, topping up your pension can not only dramatically improve your retirement prospects but also improve your current tax position.  

Remember, the maximum most people can pay into a pension this tax year is £60,000 gross or 100% of your qualifying earnings, whichever is lower (the pension annual allowance) - unless you are a very high earner subject to a tapered allowance – or are able to take advantage of ‘carry forward’ rules. That limit encompasses all contributions across all pension arrangements, including tax relief and employer contributions. Just don’t commit too much as once the money is added to your pension, you cannot touch it until you are 55, or 57 from 2028. 

Keep in mind that the value of your investments and the income from them may go down as well as up, and you could get back less than you invested. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. 

6. Explore Bed & ISA or Bed & Pension to reduce your tax liability  

The Government tightened its grip on investors with the hike to CGT rates at the Autumn Budget. Add that to the savage cut to the annual capital gains tax exemption in recent years, halved to just £3,000 by the former Conservative Government, along with the reduction in the annual dividend allowance to just £500 and more ordinary investors may find themselves paying tax on their investments for the first time.  

 Moving investments, such as shares and funds, held outside a tax wrapper into an ISA or pension, a process known as Bed & ISA or Bed & Pension allows investors to sell shares or funds – ideally, with careful use of their current exemptions - and repurchase them within their chosen tax wrapper so that future returns are tax-free. Just remember to calculate your capital gain carefully before selling, so that you’re aware of any tax liability you will incur if you exceed the £3,000 CGT exemption. Its also worth noting that the value of your investments could go up and down in line with market movements during the period between selling and re-purchasing.    

Many people seek to do Bed & ISA at the end of the tax year but one of the biggest pitfalls is savers running out of time to complete the process. ISA providers will have a cut-off point for Bed & ISA transactions at tax year end to allow enough time for the process to complete. Both a Bed & ISA and Bed & Pension can take up to 10 days or longer. With markets having had a rocky start to the year, undertaking a Bed & ISA earlier in the tax year could make more sense and ensure transactions are processed in time.  

If someone is migrating share certificates into an investment account with the aim of selling the shares, that can take up to four weeks or longer, so those with assets ready to transfer could consider starting the process now while their tax affairs are fresh in the mind from the end of the last tax year. This will eradicate any stress by ensuring people don’t miss out on their key allowances before they reset again in early April 2026 

Remember, while you may pay CGT on any profits above your annual allowance, moving the money into an ISA or SIPP means you won’t have to in the future. 

How Bed and ISA works at Bestinvest 

How Bed and SIPP works at Bestinvest 

7. Check your child benefit entitlement and boost your income now and in the future

Checking what child benefit you are entitled to can give household finances a healthy boost. The benefit can be claimed by most adults responsible for children under the age of 16, or 20 in instances where a child stays in approved full-time education or training.  Parents can either use the money to fund everyday costs or deposit it into a Junior ISA  or other savings account to help save for items like a child’s university costs, first car or deposit on a future property. 

Child benefit rules are complicated for higher earners. The threshold at which the High-Income Child Benefit Charge (HICBC) is applied is currently £60,000 and the top of the taper at which the benefit is withdrawn completely is £80,000. 

What’s really important is for those earning between £60,000 to £80,000 to still register for child benefit even if they lose the full benefit because of the High Income Child benefit Charge (HICBC). This is because even if one partner – or both - earns too much to receive a cash payment, they are still entitled to valuable National Insurance credits which count towards their eligibility for the state pension.   

To avoid missing out, parents must register their entitlement. They can then opt to take the child benefit payments and pay the HICBC at the end of each tax year, which the highest-earning parent must do through Self-Assessment. Or they can opt out from receiving the payments, and therefore avoid handling the tax charge, while still retaining their entitlement to NI credits which impact their eligibility for the State Pensions - a vital source of retirement income.  

Registering also ensures your child automatically receives their National Insurance number before their 16th birthday - something they need to start working.

See more on how to register for Child Benefit at gov.uk

8. Sign up to your employer’s salary sacrifice scheme and drop a tax band

Salary sacrifice can be an effective way to reduce your adjusted net income to avoid some of the nasty cliff edges that can hit taxpayers as their income increases. Increasing numbers of employers now offer these schemes that let staff reduce their salary or bonus payments in lieu of increased pension contributions. This is because by reducing your gross salary, it reduces the amount of income tax a worker must pay and the National Insurance Contributions for both the employee and employer.

Employees close to the £50,270 earnings threshold where the higher 40% tax rate kicks in, for example, could dip under it by using salary sacrifice pension contributions.  It is worth asking your employer if they offer such a scheme as more companies may be inclined to do so in a bid to lower employment costs following the hike in the National Insurance rate employers pay on employee salaries that came into force in April 2025. 

Salary sacrifice can also be useful for those that might miss out on Child Benefit payments because they earn too much, or those nearing the threshold for the 45% additional rate of tax at £125,140. It’s particularly beneficial for those whose earnings could fall between £100,000 and £125,140. For every £2 of taxable income above £100,000, they lose £1 of the personal allowance of £12,570. Combine the loss of the personal allowance with the 40% income tax rate and those earning between £100,000 and £125,140 under the current rules are effectively paying an eye-watering effective rate of income tax of 60% on that proportion of their income. 

While there are certain benefits to salary sacrifice, you should consider some of the disadvantages of the scheme before taking any action. For instance, a reduced salary after sacrifice could lower how much mortgage or loan you can get as lenders often assess borrowing capacity based on income. You might also see lower employee benefits such as life cover, sickness and maternity pay. It’s worth reading up on the topic and weighing up the pros and cons for your own circumstances.

* According to the BoE’s Money & Credit data for March 2025 

** Basic rate taxpayers have a Personal Savings Allowance of £1,000, higher rate taxpayers £500 and additional rate taxpayers no concession at all.