The 2026/27 tax year is upon us, and you may have only just finished maximising your allowances from last year.
While you may want to put off planning for this year’s allowances until at least the start of 2027, the earlier you begin, the better.
Early planning helps ensure you make full use of what’s available to you and can even lead to significantly stronger returns over time.
Read on to discover three reasons why you should make the most of your allowances at the start of the tax year.
1. Maximising your ISAs early in the year can lead to significant returns in the long term
ISAs are one of the easiest ways to save and invest tax-efficiently, as they allow your money to grow free from Income Tax and Capital Gains Tax (CGT).
You can currently invest up to £20,000 each tax year across your ISAs, and while much of the focus is on how much you invest, when you invest can also make a significant difference over time.
Research by Bestinvest found that maximising your allowance at the start of each tax year, rather than at the end, could make you £66,439 better off after 30 years (assuming 5% annual growth). The difference comes down to giving your money more time to benefit from compounding.
If you don’t have £20,000 available at the start of the tax year, it’s still likely to be more beneficial to invest as much as you can early to ensure you take advantage of compounding. By spreading your allowance across the year, you can make full use of it by investing around £1,666 every month.
If you use your allowance early and have more to contribute, you could also explore paying into your child or grandchild’s Junior ISA (JISA). You can contribute up to £9,000 per child each tax year, and as with adult ISAs, starting contributions earlier can boost the long-term impact of compounding.
2. The start of the tax year is the ideal time to review your pension contributions
Pensions are one of the most effective ways to build your wealth, as they benefit from both tax relief and compounding long-term growth. As such, topping them up can make a significant difference to your future financial security.
The start of the tax year is an ideal time to assess your contributions from last year and see if there’s any room to increase them for the year ahead.
Personal contributions typically receive 20% relief automatically, and if you’re a higher- or additional-rate taxpayer, you can claim further 20% or 25% relief by completing a tax return.
The Annual Allowance is the amount you can contribute to your pension while receiving tax relief each year. For most people in 2026/27, it stands at £60,000 or 100% of your earnings, whichever is lower.
You can also carry forward unused allowances from the previous three tax years, meaning you can make much larger contributions if you haven’t fully used them.
As with ISAs, pensions can benefit from significant long-term growth and compounding, so it can be useful to make any lump-sum contributions as early as possible.
3. Planning your gifts throughout the year can help keep your estate efficient
Gifting money or assets to loved ones while you’re still alive can be an effective way to reduce the size of your estate for Inheritance Tax (IHT) purposes.
Each tax year, you can give away up to the annual gifting allowance without it forming part of your estate. In the 2026/27 tax year, the allowance is £3,000. If you didn’t use it the year before, you can carry it forward, meaning you could give up to £6,000 in a single year.
Moreover, if you’re married or in a civil partnership, you can combine your allowances, meaning you and your partner could pass on as much as £12,000 in a single tax year without triggering IHT.
Larger gifts that are worth more than the allowance may not fall outside your estate straight away and could be considered potentially exempt transfers (PETs), which means they’ll typically be free from IHT if you live for seven years after making them. If you don’t, they may still be taxed, although the amount due can taper the longer you survive after giving the gift.
So, it’s a good idea to make use of your gifting allowance over time as part of your wider estate planning strategy.
By planning early in the tax year, you can make full use of your allowance without having to rush into giving away larger sums at the last minute, and you can incorporate gifting into your financial planning more sustainably.
Get in touch
Our team of independent financial advisers in Lewes is here to support you in ensuring you make full use of the allowances available to you every tax year.
To find out more, please get in touch by emailing us at financial@barwells-wealth.co.uk or by phone on 01273 086 311.
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
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund
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.
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