With the new tax year starting on 6 April, you may have already made full use of your personal allowances. However, you might have other allowances remaining that you can use to support your loved ones.
Using tax-efficient savings and investment opportunities to help your family can be a great way to boost their financial security, improve the overall efficiency of your wealth, and reduce the size of your estate for Inheritance Tax (IHT) purposes.
But these allowances reset every year, so taking action before 6 April is key to making them count.
Read on to find out more about how you can use your annual exemptions to help your loved ones.
Maximise your gifting allowance
Making gifts can be an effective way to support your family and close friends in the present, while also reducing the value of your estate for IHT purposes, which may offer them further support in the future.
Larger gifts are generally treated as potentially exempt transfers (PETs), which means that if you die within seven years of giving them, they may still be subject to IHT. However, the amount of tax liability reduces the longer you survive after you make the gift.
Smaller gifts can be covered by the annual gifting allowance, which allows you to give away a certain amount each tax year free from IHT.
For the 2025/26 tax year, the allowance is £3,000. And if you didn’t use last year’s allowance, you can carry it forward, meaning you can gift up to £6,000 in a single year.
Moreover, married couples and civil partners can combine their allowances, meaning you could collectively gift up to £12,000.
So, making use of your annual gifting allowance before 6 April is a simple way to support those closest to you, reduce the future IHT bill on your estate, and improve the overall efficiency of your wealth.
Pay into your loved ones’ ISAs
In addition to your own ISA allowance of £20,000 a year, you can also contribute to Junior ISAs (JISAs) for children under the age of 18.
For the 2025/26 tax year, the JISA allowance is £9,000. This limit applies to each child, rather than the adult contributing. For instance, if you have two grandchildren, you could contribute up to £18,000 across their JISAs in a single tax year.
You can open a JISA for a child of any age, although the money is locked in until they turn 18. If you maximised the current full allowance every year from a child’s birth to age 18, your total contributions would amount to £162,000. Combined with investment growth or interest, the value could be significantly higher by the time the child gains access.
Additionally, while it isn’t possible to pay directly into another adult’s ISA, you can gift them funds to contribute to their own allowance. So, if your partner, for example, hasn’t used their full ISA allowance, you could gift them the additional amount needed to top it up.
Although such gifts may be treated as potentially exempt transfers (PETs) if they exceed the gifting allowance, this can still be an effective way to ensure more of your wealth grows tax-efficiently.
If contributing to JISAs or supporting another adult’s ISA forms part of your plan, it’s worth acting before 6 April to make full use of this year’s allowances.
Make pension contributions on behalf of someone else
You might be familiar with the Annual Allowance, which allows you to contribute up to £60,000 to your pension each year or 100% of your earnings, whichever is lower. However, what you may not know is that you can also make pension contributions on behalf of someone else.
This can be a very effective way to pass on wealth, as the contributions you make will receive relief at the recipient’s marginal rate of Income Tax and count towards their Annual Allowance, not yours.
For someone without earnings, such as a child or partner who is out of work, you can contribute up to £2,880 each year and they will still receive 20% relief, meaning your contributions will rise to £3,600.
If the person you wish to support earns an income, your contributions can be higher, provided they remain within their Annual Allowance. You can also use the carry-forward rules, which allow any unused allowance from the previous three tax years to be backdated, potentially enabling a larger one-off contribution.
Given the long-term growth potential of pensions, contributing to someone else’s can be a great way to invest in the future of your loved ones.
Doing so can also keep more of your wealth efficient, especially if you’ve already maximised your own Annual Allowance, and it reduces the value of your estate for IHT purposes.
So, making pension contributions on behalf of someone else is well worth considering before 6 April.
Get in touch
Using your wealth to support others can be a great way to help your loved ones while keeping more of your money efficient, but it’s important to ensure your support fits in with your wider plan.
Our team of independent financial advisers in Lewes is here to support you in maximising your allowances to provide for those you care about the most.
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 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. Past performance is not a reliable indicator of future performance.
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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