How early tax-year planning could help your ISAs grow to £65,000 and boost your pension by £240,000

‍ Every year, millions of people miss out on valuable tax reliefs and allowances, often simply because they leave their planning too late. ‍

In some cases, this means missing out on thousands of pounds of tax relief. In others, it’s the lost growth from delaying investments that can end up costing tens of thousands over time.

Ensuring your money is working hard for you and making full use of your allowances requires planning, and that’s where a financial planner can help. ‍

So, with the new tax year just around the corner, read on to find out how planning early in the year could help your wealth grow.

Planning your contributions and claiming full relief can significantly boost your pension

Pensions are one of the most effective and efficient ways to grow your wealth over the long term, and making additional contributions can significantly boost your future financial security. 

Your personal pension contributions typically receive 20% basic-rate tax relief automatically, provided they are within your Annual Allowance. If you’re a higher- or additional-rate taxpayer paying into a personal pension, you need to claim the extra 20% or 25% relief by completing a self assessment tax return.

Given the significant relief offered on contributions, it’s a good idea to make as much use of your Annual Allowance as you can. For the current and upcoming tax year, the Annual Allowance for most people is £60,000 or 100% of your earnings, whichever is lower.

You can also backdate unused allowance up to three tax years using the carry-forward rule. This means that in 2026/27, you could contribute up to £240,000 into your pension and receive full tax relief, provided you haven’t used any of your allowance in the previous three years.

Moreover, if you have a personal pension, you need to claim your full relief, as failing to do so means missing out on effectively free cash.

Indeed, research in Pensions Age found that 46% of higher- and additional-rate taxpayers currently paying into personal pensions don't claim tax relief on their contributions. This means that around 2.3 million people are losing out on claiming extra money for their retirement pots. Over time, this can result in a difference of hundreds of thousands of pounds.

So, with the new tax year just around the corner, now is the time to check you’re claiming your full relief and to explore raising your regular pension contributions or paying in a lump sum.

A financial planner can help you plan early in the year to ensure you make better use of your Annual Allowance while claiming the full relief available to you.

Using your ISA allowance early could result in significant returns over time

Every year, you can invest or save a certain amount in your ISAs, which offer tax-free interest or returns on your money.

For the current and upcoming tax year, the ISA allowance is £20,000 and can be used across all your ISAs.

To make full use of your allowance, you could either make a lump sum payment or spread your contributions across the year to around £1,666 a month. However, it’s best to use the allowance as early as possible, so your money receives more tax-free growth.

Many people get to the end of the tax year and realise they still have part of their ISA allowance to use and then make a last-minute contribution. While this is understandable, leaving your payments so late could mean you miss out on considerable growth over time.

For example, if you invest £20,000 into an ISA at the end of each tax year rather than the beginning, over 25 years, you will miss out on around £65,000 of tax-free growth, assuming a 6% annual return.

That loss is not due to investment performance, but simply due to delay and missing out on compounding returns.

So, it’s important to plan your contributions for the year ahead, rather than rushing at the last minute to make use of the current year’s allowance.

Get in touch

A financial planner can help you build a clear strategy for the new tax year, ensuring you make full use of your allowances from the outset rather than rushing decisions at the year’s end.

Email info@mlpwealth.co.uk or call us on 020 8296 1799.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.