All change as a new tax year dawns?

We’ll discuss some of the changes to allowances and tax rates that are taking place or coming up in the near future, and look back on how some of these have changed in recent years.

Use the player icons above to listen on your favourite podcast app, or read the full transcript below.

This podcast isn’t personal advice. If you’re unsure what’s right for you, seek financial advice. Pension and tax rules can change, and benefits depend on personal circumstances. Investments can fall as well as rise in value, so you could get back less than you invest.

Full podcast episode transcript

[0:00] Helen Morrissey: Hello and welcome to the Switch Your Money On podcast from Hargreaves Lansdown. I’m Helen Morrisey – Head of Retirement Analysis.

[0:07] Clare Stinton: And I’m Clare Stinton – Senior Personal Finance Analyst.

We’re recording this episode on 30^th March, so what else would we be talking about other than tax year end? – which, of course, is 5^th April, one of the most important dates in the calendar.

[Pause]

[0:23] Helen Morrissey: And, indeed, yes – what else?

So, the UK tax year runs from 6^th April to 5^th April, the following year. Now, that’s important because many of the most valuable savings and investing benefits are tied to this annual cycle – this includes ISA allowances and pension tax relief.

When the tax year ends, those allowances reset. The majority of unused allowances don’t roll over, so we thought it would be a good idea to tell people some of the trends that we’re currently seeing, to help people inform what they might want to do in the next tax year.

[0:59] Clare Stinton: And, Helen, it’s fair to say that, in recent years, it’s become more and more important to take advantage of your allowances – because there’s been lots of tax rises, shrinking tax-free allowances, and frozen thresholds, all aimed at plugging the hole in the public purse.

So, ultimately, we’re now living in a higher-tax environment. People do need to be proactive to keep their hard-earned savings and investment growth out of the reach of the taxman.

Before we dive into what we’re seeing clients do in the run up to the end of tax year, we thought we’d kick things off with some tax-year trivia.

So, Helen, do you know why the tax year begins on 6^th April?

[1:34] Helen Morrissey: Well, I love a bit of tax-year trivia, but I’ve got to say I don’t know the answer to that.

[1:39] Clare Stinton: I didn’t know either – so, thankfully, a bit of googling has given us the answer.

So, the original date for the beginning of the tax year was actually 25^th March – and this dates back to the 18^th century.

So, before 1752, the British Empire used the Julian calendar – and that was 11 days behind the Gregorian calendar, which was used in Europe. So, when we adopted the Gregorian calendar, that transition meant 11 days were added to the calendar, shifting the start of the tax year from 25^th March to 6^th April.

[2:12] Helen Morrissey: A nice little history lesson there – thank you, Clare! But I do still find it strange that it originally began in March ‘cause that’s still a quarter of the way through the year.

[2:22] Clare Stinton: Well, to answer that, we need to travel back further in time to Roman times, which is when the year started in March – so it was logical that it aligned – and it’s just stuck over the centuries.

[2:32] Helen Morrissey: Okay – well, I’ve got one for you then, Clare. Did the UK once have a Hair Powder Tax – true or false?

[2:40] Clare Stinton: I’m gonna go with ‘True,’ because that’s quite weird and wonderful!

[2:43] Helen Morrissey: It is, isn’t it? – ...

[2:44] Clare Stinton: [Laughs]

[2:44] Helen Morrissey: ...and you’re right, it is true. So, you had to pay to get an Annual Hair Powder Certificate – which I love.

The money it brought in was used to fund the Napoleonic Wars with France. The high cost is one of the reasons that wig fashion declined and people started opting for their natural hair.

[3:04] Clare Stinton: Taxing on fashion!

So, the final trivia question – knowing me, we could do this all day... it’s a music one, Helen. Can you name the band who sang the song ‘Taxman?’

[3:14] Helen Morrissey; Now, I am a proud Liverpool lady, so I really need to get this one right, if I’m...

[3:20] Clare Stinton: [Laughs]

[3:20] Helen Morrissey: ...ever to be allowed back there again! – ...

[3:22] Clare Stinton: [Laughs]

[3:22] Helen Morrissey: ...so I’m gonna say that is The Beatles.

[3:24] Clare Stinton: Spot-on!

So, it was penned by George Harrison – their lead guitarist – in protest of the 95% super-tax rate that the band were facing, which was introduced by Harold Wilson’s Labour Government in 1966.

So, maybe some useful knowledge there for a pub quiz for our listeners but now let’s get back to Personal Finance.

The clock is ticking to the end of the tax year, so people will naturally be thinking about what they can do to make the most of their allowances. ‘What kind of activity are we seeing from clients so far?’ – and I should point out that we’re just over a week out from the deadline when having this conversation – and, as we’re about to talk about what people are doing, a little reminder that nothing that we discuss in this episode is personal advice. Just because people are doing something doesn’t necessarily mean it’s the right thing for you.

[4:10] Helen Morrissey: Absolutely. So, it’s been an extremely busy period – as you can well imagine – but the evidence is showing that clients are making the most of their allowances.

So, if we start with the annual allowance for pensions – ‘cause you know I love a pension... So, the annual allowance is the amount that you can contribute to your pension and still receive tax relief. So, currently, it stands at £60,000, and your annual allowance will be whichever is the lowest of £60,000 or your annual earnings.

So, for instance, if your annual earnings were £80,000, your pension annual allowance would be £60,000 – ‘cause that’s the higher figure. However, if your annual earnings were £30,000 a year, you could only put £30,000 into your pension that year.

Now, we’ve seen a lot of movement in these annual allowances over the years – but, in 2023-2024, it was raised from £60,000 from £40,000. Our client data shows that people have really embraced this higher allowance, but the number of clients contributing exactly £60,000 to their pension so far this tax year... it was up 61% since 2023-2024 – so quite the leap there.

And that’s not all... when we look at people potentially using ‘Carry forward,’ we see another quite big surge. So, ‘Carry forward’ enables you to use unused annual allowances from the previous three tax years, to really turbocharge those pension contributions.

As it currently stands, this means that you can contribute up to £220,000 to your pension – this is gonna rise to £240,000 from next tax year as long as you earn at least that amount.

Now, the data suggests that the number of people using this has surged 73% since 2023-2024.

[6:10] Clare Stinton: Those are some massive increases, Helen – but these aren’t the only interesting trends that you’ve seen, are they?

[6:15] Helen Morrissey: No. So, when the annual allowance was increased in 2023-2024, so was what was known as the ‘Money Purchase Annual Allowance.’

Now, this had previously been £4,000 per year, but it was hiked up to £10,000. This is the amount that people who have previously accessed their defined contribution pension flexibly are allowed to contribute to their pension every year.

[6:41] Clare Stinton: And what do you mean by ‘Flexible access?’

[6:44] Helen Morrissey: So, it means it doesn’t affect you if you were to take tax-free cash from your pension, for example – you’d need to take a taxable income in a flexible manner. Examples of that would be going into income drawdown, for instance, or taking a taxable cash lump sum.

Now, again, our client data shows that the number of people contributing exactly £10,000 to their SIPP has grown 39% between tax year 2023-’24, and the current tax year, which is 2025-2026.

[7:15] Clare Stinton: Wow, it’s great to hear so many people making the most of their allowances so far – and there’s still time to go before midnight on 5^th April.

Did you spot anything else in your data dive?

[7:26] Helen Morrissey: So, again, this is from the pension side – and it is the last one, I do promise. We looked at the number of people contributing exactly £3,600 to their SIPP, and that is up 11%.

[7:39] Clare Stinton: And why is that significant?

[7:41] Helen Morrissey: So, there’s a few potential things, really.

So, if you don’t work, that’s the amount that you can contribute to your pension. It may also be used by groups, such as the self-employed, who may not know what their earnings are likely to be – so they may just decide to put in a smaller amount early on, and then choose to boost it later on in the tax year when they’ve got a better idea of how much they’ve earned.

[8:02] Clare Stinton: Couldn’t that also indicate people contributing to the SIPP of a loved one?

[8:06] Helen Morrissey: Absolutely, yeah. So, one partner has maybe used all their own allowance, and is contributing to the SIPP of a non-working spouse – or even a child through a Junior SIPP.

It’s a great way to support the pension-saving of someone who is out of the workforce... you know, caring for children, for example – and contributing to a Junior SIPP is also a great way to start a loved one’s pension journey.

So, anyway, Clare, I’ve gone on enough about pensions [laughs], ...

[8:31] Clare Stinton: [Laughs]

[8:31] Helen Morrissey: ...if that’s possible!

Can you tell me what you’ve been seeing on the ISA side of things?

[8:36] Clare Stinton: I would love to – and it’s a similar positive story.

So, the number of subscriptions to ISAs – both Cash and Stocks and Shares – are up. The number of people mixing out their ISA allowance is also up, year-on-year, for the last three tax years – and, to me, this really suggests that people are increasingly recognising that, in our high-tax environment, ISAs and pensions are among the most effective tools available to you... they are your tax-planning best friends.

The number of people maxing out Cash ISAs has doubled compared to last tax year, 2024-’25 – and there was still a couple of weeks to go to tax year end at the time that that data was run, so we could see this rise well above 100% increase.

[9:17] Helen Morrissey: And so, there’s a few reasons behind that, though – isn’t there, Clare?

[9:20] Clare Stinton: That’s right.

So, firstly, we have historically-high interest rates – so Easy Access Cash ISAs are currently offering around 4.2%-4.6% – so it is worth checking, if you have a Cash ISA, ‘What rate are you getting, and could it be working harder with another ISA provider?’

Just make sure, if you do choose to move that money, that you place a transfer instruction... don’t just withdraw the cash, as you’ll lose that all-important ISA wrapper.

The Cash ISA allowance for under-65s is dropping from £20,000 to £12,000 from April 2027 – which could also explain the higher volumes of Cash ISA subscriptions. That door is closing... so there was tax year ’25-’26 – this tax year – and next tax year, 2026-’27, to use it before we see that reduction. So, it is worth saying that over-65s will keep the £20,000 Cash ISA allowance.

And then, last but not least, people may be maxing out their Cash ISA allowance by moving existing savings into that ISA shelter – and that’s because millions are expected to start paying tax on savings that they’ve held outside of ISAs.

It’s due to a combination of higher interest rates, but also frozen income tax thresholds. People do need to be aware that the personal savings allowance shrinks as you move up a tax band.

So, outside of tax-efficient wrappers, basic rate taxpayers can earn £1,000 interest, tax-free – higher rate taxpayers can get a £500 allowance – and top rate taxpayers have to pay tax on every pound of interest earned.

[10:59] Helen Morrissey: So, who could find themselves at risk of paying tax on their savings, then?

[11:03] Clare Stinton: Really good question – and the reality is that, with savings rates where they are today, it doesn’t take a fortune to trigger a tax bill.

First-time buyers that are diligently building a house deposit, pensioners who have perhaps parked their tax-free cash in savings accounts, as well as high earners leaving their emergency fund in current accounts... they could all find themselves handing over some of that interest to the taxman.

A basic rate taxpayer, with around £34,000 in savings (that’s earning 3%) would blow through that personal savings allowance of £1,000 – and a higher rate taxpayer would reach their £500 allowance with just £17,000 in savings. So, savers really should take this opportunity to review what they’re holding in cash now to avoid a tax bill – because the other thing to consider is that tax rates on savings will rise next April.

So, from April 2027, they will be taxed at income rates plus 2%. So, that is 22% for basic rate taxpayers, 42% for higher rate taxpayers, and 47% for top rate taxpayers. So, moving your cash into an ISA will shield your savings from tax this year and for future tax years.

[12:16] Helen Morrissey: That’s really interesting – and, as you say, time is running out for under-65s to take advantage of those bigger Cash ISA allowances. But what about Stocks and Shares ISAs, Clare?

[12:28] Clare Stinton: Our client data shows that the number of people maxing out their Stocks and Shares ISA (remember adults get a £20,000 annual ISA allowance that you use or lose) is up 46% on two tax years ago – so we’re looking at data from 2023-’24 – and then the current year, which is 2025-’26. But, most interestingly, the number of people maxing out their ISA allowance – by spreading their money across a Cash ISA and a Stocks and Shares ISA (because you can use both) but just remaining with that £20,000 allowance – is up a ginormous 292% when we look back at 2023-’24 figures.

So, by splitting your allowance between a Stocks and Shares and Cash ISA, it really enables you to have the best of both worlds. You get tax-free interest on your savings – so that’s cash that you can tap into, if needed, while you’re also investing for long-term growth.

For those people sitting on cash well beyond rainy-day reserves, it might be time to look at putting money that you won’t need for the next five years to work with a Stocks and Shares ISA.

A Stocks and Shares ISA will shield the returns from tax, while giving you the opportunity to get inflation-busting returns, and it will help your money work harder over the long term.

[13:45] Helen Morrissey: Wow – so nearly a 300% increase – that’s amazing. So, that’s some really positive trends out there for people’s financial resilience.

[13:54] Clare Stinton: Absolutely.

So, Helen, in summary, what would you say are the key things to bear in mind – not just this tax year, but moving forward?

[14:01] Helen Morrissey: Well, it is really all about making the best use of all of your allowances, isn’t it?

So, SIPPs and ISAs are tremendously tax-efficient ways of building your wealth, and they also offer safety against a whole host of taxes, such as Capital Gains, Income Tax, and dividend tax.

Now, some of these allowances will be ‘Use or lose’ every tax year – so, for instance, your ISA allowances – but there are others, such as your SIPP annual allowance, where you can make use of ‘Carry forward,’ to make the most of those allowances.

[14:31] Clare Stinton: We should point out, actually, that there’s a carry-forward calculator on our website that can help with the maths – you just need to know what you contributed to your pension in the last few tax years, and it’s best to have that to hand.

[14:43] Helen Morrissey: Yes – and another key point to make as well is... if you want to invest, but you’re not quite sure exactly where, then you can still contribute to a SIPP, or a Stocks and Shares ISA, and keep it in cash for a short period before you make a decision. You’ve still made the most of your allowance, and then you can choose your investments. It can be a good idea to check with your provider as to whether they offer any ready-made options that can actually make that transition into investing that bit easier.

[15:10] Clare Stinton: Really good point. I’ve heard so many times that indecision about where to invest can prevent action – but, as you say, you can choose investments later, or select one of the off-the-shelf options, with the intention to perhaps amend it down the line.

It’s also worth saying... don’t worry if you miss the 5^th April deadline – or, if you didn’t have the cash to throw in a lump sum this year, allowances reset on 6^th April. You can get off to a flying start by setting up a regular saver into an ISA or pension for the next 12 months.

[15:37] Helen Morrissey: That’s absolutely right – a new tax year means new opportunities.

[15:41] Clare Stinton: And being an early bird has its advantages. Planning now will enable you to spread your contributions across the tax year, rather than scrambling to use your allowances next April. Paying into your ISA or pension each month helps create a smoother cash flow – you can simply set the amount and forget it, and then you can adapt to the strategy, if you need to, during the year. It also means your money is invested sooner, giving it more time in the market to benefit from compounding – and, potentially, delivering greater returns.

On that note – Helen, what might tax year 2026-’27 have in store?

[16:15] Helen Morrissey: Well, there’s a few changes coming in on 6^th April that people do need to be aware of.

So, dividend tax will increase by two percentage points for basic and higher rate taxpayers. This means that the basic rate rises from 8.75% to 10.75%, and 33.75% to 35.75% if you’re a higher rate taxpayer. There is no change if you are an additional rate taxpayer.

Income tax relief on Venture Capital Trusts (otherwise known as VTCs) drops from 30% to 20%. If we look at Capital Gains Tax, that’s gonna rise from 14% to 18% on Business Asset Disposal Relief.

We also need to talk about income tax thresholds. So, they have been frozen until 2031 – which means that more people will pay Income Tax, and more people will pay Income Tax at higher rates.

As we’ve outlined for the last 20-ish minutes, planning and using your ISA and pension allowances can soften the impact of all of these.

[17:24] Clare Stinton: The start of the tax year 2026-’27 also signals a 12-month countdown to unused pensions forming part of your estate for inheritance tax purposes.

Helen and I covered this in the last episode – all on Inheritance Tax – so do go back and listen to that, if you missed it. It’s also a one-year countdown to the Cash ISA allowance reduction for under-65s that we mentioned earlier, and the higher income tax rates on savings, all from April 2027.

We have covered a lot of ground today – so, for our listeners, do remember, you can go back and re-listen to segments of this recording... that is the beauty of a podcast.

That’s it for this week – but, before we go, we should remind you that this was recorded on March 30^th 2026, and that all information was correct at the time of recording.

Next week, Emma Wall and Matt Britzman will be back with an Investment Special.

[18:13] Helen Morrissey: Nothing in this podcast is personal advice – if you’re unsure about what’s right for you and your circumstances, you should seek advice.

[18:21] Clare Stinton: Tax rules can change and benefits depend on circumstances. Pension money can’t normally be accessed until 55, though this is rising to 57 from 2028.

[18:31] Helen Morrissey: Over five years or more, investing typically offers better returns than cash savings – however, investments go up and down in value, so you could get back less than you put in.

So, all that’s now left is for us to thank our Producer, Elizabeth Hotson.

[18:47] Clare Stinton: And to thank you all, very much, for tuning in – we’ll be back again soon. Bye!

[18:52] Helen Morrissey: Bye!