Pictured above: Helen Draper MMath(Hons) FCA
As the end of the 2025/26 tax year approaches on 5 April, it is a good time to review your affairs, making the most of opportunities to maximise your income and minimise your tax, some of which are detailed below.
Gift Aid Payments
Don’t forget that, in respect of the 2025/26 tax year, higher rate taxpayers can claim an extra 20% of the ‘grossed up’ donation from H M Revenue & Customs (HMRC). For example, if a donation of £80 is made to charity under gift aid during the year, the higher rate tax relief that HMRC will give you will be 20% of £100 i.e. an additional £20. For additional rate taxpayers (those with taxable income above £125,140 for the year), the extra relief would be £25.
Pension Contributions
You may wish to consider making an additional payment into your pension scheme before 5 April 2026, particularly if your total income for the current year may take you into the 40% (or even higher) income tax rates. For most individuals, the 40% rate starts to apply once income reaches £50,270. The tax relief for personal pension contributions works in a similar manner to gift aid payments and as a result, tax relief is available at your marginal rate of tax (subject to various criteria – including restrictions regarding the annual and lifetime allowances – which are beyond the scope of this article).
High Earners
High earners also need to bear in mind that they may be at risk of losing their personal allowance. Those with “net adjusted income” in excess of £100,000 for 2025/26 will lose the whole or part of their personal allowance of £12,570. For every £2 of income in excess of £100,000 the allowance is reduced by £1, leading to an effective marginal rate of income tax of 60% on income between £100,000 and £125,140. Once net adjusted income reaches £125,140, the allowance is completely eliminated.
With both gift aid donations and pension contributions, it is certainly worth considering making a one-off payment before 5 April 2026 if you are in danger of losing all or part of your personal allowance or being subject to the High Income Child Benefit Charge (which applies when “net adjusted income” exceeds £60,000).
For example, if you are expecting your total income for 2025/26 to be £110,000 (and assume for these purposes that you haven’t yet made any pension contributions in the tax year), by making a net pension payment of £8,000 on or before 5 April 2026 (equivalent to a gross contribution of £10,000), could save you additional income tax of £4,000, meaning the effective cost (after tax relief) of the pension payment is actually only £4,000. In other words you obtain the benefit of £10,000 being contributed to your pension scheme at a cost of only £4,000 – a massive 60% relief.
The above are only a small selection of some of the tax planning points included in our annual publication – End of Tax Year Guide Spring 2026 which is available on our website or to anyone who would like to telephone our offices or e-mail us at mail@pearsonmay.co.uk. Copies of this will be provided free of charge.
The above is for general guidance only and no action should be taken without obtaining specific advice. Such advice in relation to pension schemes and investments should be obtained from your pension adviser or an independent financial adviser.
If you are looking to slice your tax, it pays to get professional advice.
At Pearson May we specialise in a full range of accountancy services to help you maximise your profits and minimise the tax you have to pay.
Call Bath 01225 460491 or visit pearsonmay.co.uk
