With the 2026/27 tax year just around the corner, you might have only just finished making full use of your allowances from 2025/26.

People are often busy and only remember to maximise their ISAs, top up their pensions, or use their other allowances as the deadline approaches.

However, a more effective approach is to plan how you’ll use your allowances across the year and spread your contributions rather than making last-minute payments. This can help you make full use of your available efficiencies and can also lead to stronger returns over time.

So, as the new tax year is about to start, read on to discover how early planning can help you make the most of your allowances.

1. Using your ISA allowance early can make a significant difference over time

ISAs offer a tax-efficient way to grow your savings and investments, helping you keep more of your returns while maintaining flexible access to your money.

In the 2026/27 tax year, you can contribute up to £20,000 across your ISAs, and when you make your contribution can make a significant difference to your long-term returns.

Research by Bestinvest found that consistently investing your full allowance at the start of each tax year, rather than waiting until the end, could leave you £66,439 better off after 30 years (assuming 5% annual growth).

This difference is solely down to time in the market. Investing early means more of your money can benefit from compounding growth, which can have a significant cumulative effect over time.

Of course, you may not have £20,000 available at the start of the tax year. But the more you’re able to invest early, the better your chances of benefitting from compounding. If you spread it across the year, you can make full use of your ISA allowance by investing around £1,666 every month.

If you have already used your ISA allowance and would like to support younger generations, you may also consider contributing to a Junior ISA (JISA).

You can invest up to £9,000 into a JISA each tax year per child. As with adult ISAs, starting contributions earlier in the year can improve the benefits of compounding over time.

2. Increasing your pension contributions early can improve your long-term security

Pensions offer the double benefit of tax relief and long-term growth potential, making them one of the most effective ways to build wealth over time.

Your contributions typically receive Income Tax relief at your marginal rate, up to your Annual Allowance, which is £60,000 or 100% of your earnings, whichever is lower. You can also carry forward any unused allowances from the previous three tax years.

In most cases, contributions receive 20% basic-rate tax relief automatically. If you are a higher- or additional-rate taxpayer, any extra relief can be claimed through a self assessment tax return. Making contributions earlier in the tax year and submitting your return promptly means you can access this full relief sooner, giving your pot more time to benefit from compounding growth.

As such, the start of the tax year is an ideal time to review your pension strategy. You might choose to increase your regular contributions or make a lump sum payment to ensure you are making full use of your available allowances.

If you have already used your full Annual Allowance and still want to improve the tax efficiency of your wealth, you could also consider contributing to a loved one’s pension. In this case, the contribution counts towards their Annual Allowance rather than yours, and the tax relief is applied at their marginal rate.

3. You can support loved ones efficiently by giving gifts throughout the year

Gifting to family and friends during your lifetime can be an effective way to reduce the value of your estate for Inheritance Tax (IHT) purposes.

However, the timing and structure of gifts matter. Some gifts may still be subject to IHT if you pass away within a certain period, meaning your loved ones could face an unexpected tax bill in the future.

Larger gifts are typically treated as potentially exempt transfers (PETs). If you survive for seven years after making the gift, it will usually fall outside your estate for IHT purposes. If you die within that period, the gift may still be taxable, although the amount of IHT due can reduce over time.

For smaller gifts, you can make use of your annual gifting allowance, which enables you to give away a set amount each tax year without it being included in your estate. For the 2025/26 tax year, this allowance is £3,000. If you didn’t use the previous year’s allowance, you can carry it forward for one year, allowing you to gift up to £6,000.

Married couples and civil partners can combine their allowances, meaning you could pass on up to £12,000 in a single tax year without those gifts being subject to IHT.

By planning ahead and making use of these allowances throughout the year, you could pass on up to £1,000 a month as a couple, gradually reducing your estate while supporting your loved ones.

So, taking a structured approach to gifting can help improve tax efficiency and also provide peace of mind that your family won’t face an unexpected charge on the support you’ve given them.

Get in touch

A financial planner can help you make the most of your allowances and ensure your money works as hard as possible for your goals.

To speak to a financial planner, get in touch.

Email info@blueskyifas.co.uk or call us on 01189 876655.

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.