Financial advice: what are consumers considering ahead of the new tax year? 

The UK tax year runs from 6 April to 5 April.

As the new tax year draws closer, there are many important considerations for your clients and prospective new customers, as there tend to be several changes, such as higher taxes or lower thresholds for some allowances.  

We explore what consumers and business owners are likely to have in mind. 

What are the key considerations for consumers ahead of the new tax year? 

There are many aspects that both your client and people who may seek out financial advice must consider before 5 April, some of which are recurring, while others may be a one-off query.  

1. The ISA allowance – use it or lose it 

Everyone has an individual savings account (ISA) allowance of £20,000 a year. An ISA is a useful way to save as individuals don’t pay tax on interest, income, or capital gains from investments. 

As the capital gains tax (CGT) and dividend allowances have been reduced significantly to £3,000 and £500 a year, an ISA can be a useful way to reduce an individual’s tax liability.  

While there is speculation that the £20,000 annual allowance for cash ISAs may be cut, this is yet to be confirmed. However, if a cut happens, it could be a significant concern for anyone using an ISA to save or invest. 

To prepare for questions around ISAs in the run-up to the Spring Forecast, it’s wise for advisers to keep up to date with speculation and start looking into alternative options consumers can explore. 

There are many types of ISAs, including: 

• Cash 

• Stocks and shares for investing 

• Lifetime ISA to help someone save for a first home or retirement 

• Innovative finance ISA for peer-to-peer loans or ‘crowdfunding debentures’ 

• Junior ISA to save money or invest on behalf of a child 

An alternative to a junior ISA is a junior self-invested personal pension (SIPP), which can boost a child’s retirement savings as £2,880 can be paid in a year, rising to £3,600 due to tax relief. However, they can’t access it until age 55 (57 from April 2028). 

2. Inheritance tax changes 

Inheritance tax (IHT) can have a big impact when passing down assets as it’s charged at 40%. 

While there are ways to reduce an IHT bill legally, many people may be more concerned about upcoming changes to IHT in relation to pensions. 

Individuals currently don’t pay IHT on pensions, but from April 2027, inherited pensions will be brought into IHT. 

This marks a considerable shift in retirement planning, prompting many to seek financial advice. FT Adviser has revealed a fifth of surveyed customers aged 35-49 say they’ll seek advice due to this change. 

To get ready, advisers should think about estate planning and how individuals can build and spend their pension, so they don’t risk running out of money but also don’t end up incurring a huge IHT bill.  

3. Capital gains tax 

Everyone has a CGT allowance of £3,000, which can help reduce tax liabilities, especially after the recent rate rises.  

More people may be considering taking advantage of their ISA, tax allowances, or transferring assets to their spouse to avoid paying CGT legally. 

Financial advisers need to be aware of the right strategies people can use to minimise a CGT bill. 

4. Top up pension 

The maximum someone can contribute to a pension each year is £60,000 or 100% of their annual earnings. 

It can be beneficial for your client to top up pension savings, as they may pay less income tax as a result and keep state benefits such as child benefit and their personal tax allowance.  

Any growth, interest, and income in a pension is free from tax, and if someone passes away before age 75, it would usually be passed down tax-free to beneficiaries. However, this will change from April 2027. 

For advisers, consumers will be looking for help tracking down their full pension contributions and recommendations for ways to reduce their tax liability, as well as understanding how estate planning will change from 2027.  

5. NI contribution top-up rules to change 

From April 2025, people cannot top-up national insurance (NI) contributions back to April 2006 and will only be able to fill in gaps over the last six tax years. 

NI records are important as this can impact how much state pension a person gets. This may be a good opportunity for your clients to review their whole retirement plan instead of focusing solely on state pension entitlements.  

What are key considerations for business owners ahead of the new tax year? 

There are many things that business owners must consider before 5 April. Here is what you need to know to help them plan.  

1. Review business accounts 

Business owners must ensure their year-end accounts are accurate, including the balance sheet. 

This means making sure all pension contributions, expenses, employee salaries, and sales invoices are accounted for, as well as safeguarding cash balances during the year-end period.  

If the company pays dividends, these must be distributed after corporation tax is paid.  

Reviewing business accounts is an opportunity for owners to consider costs in the new tax year, such as the rise in the national minimum and living wages and the upcoming hike in employer NI contributions.  

One of the best ways financial experts can help business owners is by making sure any allowances or benefits that could impact year-end accounts are used, and they have strategies in mind to control rising costs.  

2. Planning for upcoming tax deadlines 

Meeting tax filing and payment deadlines is vital for business owners, as penalties can be hefty. 

Qualified accountants can help business owners plan and meet tax deadlines early and ensure accurate reporting. They can also use this opportunity to see if they can add value elsewhere. 

For example, a firm may have an expansion plan or require funding they need support seeking.  

3. Resolve outstanding payments 

Business owners must resolve any outstanding payments, such as bonuses and expenses, before the end of the tax year to prevent them from being pushed into next year. 

While this may not seem like a big deal, this can affect the ability of owners to accurately estimate their company’s financial performance, as outstanding payments can impact profits.  

When reviewing your client's finances, advisers or accountants should highlight the impact of delayed payments compared to when everything is settled before year-end and develop strategies to ensure the right payments are made.  

4. Finalise the budget for the next tax year 

Having a budget for the new tax year is important, and business owners may need support. 

The company’s performance and balance sheet must be analysed to see if there are opportunities to optimise trading, such as focusing on periods of stronger demand and sales. 

This is an opportunity to help clients break down the strongest and weakest areas of demand and help with a strategy to focus on peak times.  

5. Don’t forget personal tax allowances 

While it’s important for business owners to use any related allowances, they also should not neglect their individual allowances.  

These include those already flagged earlier in this article, including the ISA, pension, dividend, and CGT annual allowances.  

Advisers should ensure they fully understand tax allowances and exemptions for both individuals and businesses, so they can share this insight and add value.  

6. Ensure compliance 

Business owners can do their annual accounts or use accounting software but must comply with legal regulations such as the General Data Protection Regulation (GDPR).  

If there’s any doubt about meeting legal obligations or regulations, business owners should seek expert legal advice.  

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