Spring clean your financial planning

With the new financial year in full swing, now is the opportune moment to pause and reassess your personal planning and finances. It’s one of those tasks you’ve probably been putting off, especially amidst the surge in the cost of living; it can be a daunting chore, but it is absolutely crucial.

Life changes, so it’s vital to consider whether the financial planning you made even just a couple of years ago is still relevant. Spring is the season to revisit your goals and think about your long-term objectives, so comb through your bank statements, pinpoint where your money is going, and identify where savings can be made.

What’s new for the 2026/27 financial year?

There are several important changes and considerations for the current tax year that could impact your financial planning:

• ISA allowance reset: The annual ISA allowance has reset to £20,000, offering a fresh opportunity to maximise tax-efficient savings.
• Cash ISA changes ahead: Looking ahead to April 2027, there are proposals to reduce the Cash ISA limit for those under 65 – something to keep in mind for longer-term planning.
• Pension contributions remain valuable: The annual pension allowance remains at £60,000, although this can taper down to as little as £10,000 for individuals earning over £200,000. With income tax bands still frozen, pension contributions continue to be a highly effective way to reduce taxable income and preserve tax bands. If you are earning over £100,000, pension contributions can be a powerful way to reclaim any lost personal allowance and bypass the 60% effective tax rate
• Upcoming pension and tax changes: There is now one more year before pensions are brought into scope for Inheritance Tax (IHT) from April 2027, making this a key window for planning. In addition, salary sacrifice changes expected from 2029 may alter how benefits are structured in the future.
• Capital Gains Tax (CGT): Where Business Asset Disposal Relief (BADR) applies, the CGT rate has increased from 14% to 18%, impacting business owners and those planning disposals.
• Inheritance Tax (IHT) updates: Changes to Agricultural Property Relief (APR) and Business Relief (BR) mean a combined £2.5 million allowance qualifies for 100% relief, with 50% relief applying above this threshold.
• AIM-listed shares will no longer benefit from full BR. Instead, they will receive 50% relief, effectively creating a 20% IHT liability on these holdings, significantly changing their role in estate planning.
• Dividend tax increases: Dividend rates have risen by 2%, now sitting at 10.75% for basic rate taxpayers and 35.75% for higher rate taxpayers

Financial Planning for Retirement

In terms of pensions, there are many considerations to be made with your financial planning.

With the annual allowance still at £60,000 (subject to tapering for higher earners) and income tax thresholds frozen, making the most of pension contributions continues to be a highly efficient way to manage taxable income and protect your position within key tax bands.

For those in workplace schemes, it’s also important to consider within your financial planning whether you are fully benefiting from employer contributions, particularly as salary sacrifice arrangements may evolve in the coming years.

Alongside this, the ISA allowance reset provides an additional opportunity to balance pension saving with tax-efficient access to capital, especially ahead of potential future changes to Cash ISAs.

When planning for retirement, two key questions remain essential:

• Will you have enough to support the lifestyle you want?
• Is your wealth structured in the most tax-efficient way?

With pensions set to fall within the scope of Inheritance Tax from April 2027, the current tax year represents a key planning window within financial planning. Reviewing how your pension fits into your wider estate strategy, and considering options such as gifting or other estate planning approaches, may help mitigate future tax liabilities.

The power of financial planning

This is where effective financial planning really proves its value. It’s about taking a step back, looking at your full financial picture, and creating a strategy that ensures your money is working as hard as possible for you. 

By understanding your goals, lifestyle needs, and existing assets, you can make better use of pensions, ISAs, and other tax-efficient solutions to help your wealth go further. 

With so many changes on the horizon, now is the ideal time to review your financial arrangements and ensure you’re well-positioned for the future. 

The earlier you start, the more options you’ll have, and the more confident you can feel, even as circumstances evolve. 

If you’re unsure where to begin, please do not hesitate to get in contact with Kelly Shek or your usual AAB Wealth contact. 

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