Allowances, allowances, allowances: perhaps the most obvious impact that the end of the tax year has for you is when your tax-efficient allowances run out.
So, for anyone using an Individual Savings Account (ISA) or personal pension to grow their money, or is self-employed; here’s everything you need to know about the relevant tax year deadlines.
- When is the end of the tax year?
- What happens to your ISA at the end of the tax year
- Saving and/or investing outside an ISA
- The tax year for Self-Employed individuals
- What does the tax year mean for pensions?
When is the end of the tax year?
The tax year ends on April 5th each year, with a new one starting the next day (on April 6th). Although this may be a little tricky to remember (why couldn’t it just be January 1st to December 31st, eh?), it’s additionally confusing because when it’s written down, it spans across two years.
So, for example:
We’re currently in the 2024/25 tax year:
The end of tax year 2024/25 date is April 5th 2025.
April 6th 2025 – April 5th 2026 will be the dates of the 2025/26 tax year:
With April 5th 2026 being the end of tax year 2025/26.
And just to add some more confusion, you’ll sometimes hear it called ‘the fiscal year’.
Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.
What happens to your ISA at the end of the tax year?
Each year, every adult who’s a UK tax resident gets an allowance to save or invest within an ISA tax-free (meaning they won’t need to pay income or capital gains tax on their profits).
Currently, the ISA allowance is set at £20,000, which can be used across any of the types of ISA available:
- Cash ISA
- Stocks and Shares ISA
- Lifetime ISA*
- Innovative Finance ISA
* You could also spread it across multiple ISAs (say if you have three different Cash ISAs). But it’s worth mentioning that the Lifetime ISAs are different. You can only have one per person open at any time, and they have a limit of £4,000 a year, which is included in your £20,000 allowance. However, you can still use the remaining £16,000 in any of the other three ISA types (if you wanted to). For example, you could put £4,000 in a Lifetimes ISA, £6,000 in a Cash ISA, and £10,000 in a Stocks and Shares ISA.
The ISA allowance has been set at £20,000 since 2017, but it’s important to keep in mind that this may change in future tax years depending on what the government decides.
The end of the tax year is also the end for your tax-free ISA allowance. So, if you haven’t used the full amount yet, it could be worth adding to your ISA before that comes around. As of April 6th, the new tax year will begin, and you’d get a new £20,000 allowance to play with.
ISA allowance deadline
The deadline for using your ISA allowance is April 5th. After this, the tax year ends, and a new tax year begins — giving you a handy new ISA allowance.
While not everyone will be able to use their £20,000 allowance in full during every tax year, some people will try to channel as much money as possible into their ISAs until that allowance limit is reached.
Can I rollover my ISA allowance?
Unfortunately, not.
Your ISA allowance is a ‘use it or lose it’ tax-free benefit that you’re entitled to each tax year.
Any remaining allowance that you don’t use can’t be carried over to the next tax year. However, every April 6th it effectively ‘resets’ back to £20,000 (unless the government has decided to change the allowance amount, of course!).
It doesn’t matter how much money you manage to build up in your ISAs over the years; both the money you put in and the interest/profit it makes are completely tax-free when you come to withdraw.
What happens if I don’t use my full ISA allowance?
Nothing negative happens, as such, it just could be considered a missed opportunity. If you choose not to use your ISA allowance for five years in a row, that’s £100,000 of tax-free money you could have saved or invested.
Plus, the compounding interest that’s built up in that time could be significant! If you’d maxed out the full £20,000 allowance for the past 5 years in an account that gave you an annual return of 4.5% (paid monthly), that would work out at £114,655.76. And let’s not forget that every year beyond that it would be accruing more interest!
Now, we know that the average person might not have £20,000 spare to put into an ISA every year. But even by putting just some money aside, you should still theoretically see the power of compounding work in your favour.
What happens if I’ve used my full ISA allowance?
Firstly, well done for keeping track of how much of your allowance you’ve used, as it’s your individual responsibility to keep on top of this (even when you’re using multiple ISAs), rather than the provider’s.
If you were to add any more money and exceed the £20,000 threshold before April 6th then HMRC will likely get in touch with you about this.
In terms of what to do next, you have two options:
- Either pause saving/investing until April 6th to wait for your next £20,000 allowance to reset.
- Or, you continue to save or invest in an alternative type of account (but not within an ISA!) — read on to find out the tax considerations of this and why your income tax brackets may play a role in your decision.
Saving and/or investing outside an ISA
Investing
If you are in a position to use up your entire ISA allowance in a tax year (if not from your regular income, then perhaps from an inheritance or big win), and you want to know what you can do beyond that £20,000 amount, there are still some options on the table.
Do bear in mind that you will be subject to tax for saving or investing outside of an ISA. However, once the ISA allowance is used up and you’re waiting for the next April 6th to come around, you could look at using something like a General Investment Account (GIA) for investing, or a regular savings account if you’d prefer to have your money in cash savings instead.
As of the current tax year (2024/25), basic rate taxpayers are allowed to earn interest and/or profits of £1,000 without needing to notify HMRC or put it on a Self-Assessment tax form. For higher earners, this drops to £500, and for additional rate earners, it drops to £0.
Please remember, with investing, your capital is at risk and you could get back less than you put in. The above figures are for example use only and not indicative of guaranteed future returns.
Saving
If you have shorter-term goals that you’re saving for (e.g. money you need access to in the next five years, or building an emergency fund), a savings account that gives you quick access, like Wealthify’s Instant Access Savings Account (powered by ClearBank), could be an option to explore.
You can also opt for fixed-term savings accounts, but remember, these won’t allow you immediate access to your funds if you need them urgently. A similar principle for savings accounts applies as the investing rules mentioned above. Basic rate taxpayers can earn up to £1,000 in interest before needing to contact HMRC (though the limit is £500 for higher rate taxpayers, and zero for those paying the additional taxpayer rate).
Saving or investing for a child
If you’re a parent or legal guardian and you are saving for a child, you could consider opening a Junior ISA for them. Same as for adults in the UK, children are also entitled to an ISA allowance — which is a ‘junior’ rate of £9,000 per tax year (though this could be subject to change in future).
If you use your own £20,000 to save or invest for your child, it could be worth considering doing this in the child’s own ISA until the money reaches their £9,000 allowance limit. Noting that the money is held until the child turns 18 and can’t be withdrawn before then.
Wealthify offers a Junior Stocks and Shares ISA which is an investing account, rather than a savings, and as such there is a risk to capital involved.
The tax year for Self-Employed individuals
If you’re about to become self-employed, or have just started out in the past year, then you may have some questions about how the tax year cycle will work for you — and the short answer is that it’s the same!
April 6th to the following April 5th is the tax year for anyone who is self-employed.
However, the confusion lies with the different deadlines for submitting your Self-Assessment form and when to pay your bill. Here’s a simplified breakdown to help you:
Everyone who’s a tax resident of the UK is entitled to a trading allowance of £1,000 per tax year (before you claim any deductions), but if you’re unsure, you can easily check whether you need to register as self-employed with HMRC here.
If you need to, you can also register on their website and they’ll be able to calculate the tax bills you may need to pay.
* It’s wise to financially prepare for a second ‘payments on account’ instalment that will be due by July 31st. From your second year of being declared as self-employed onwards, HMRC will help you out by splitting the bill into two instalments, and in doing so, estimate how much tax you need to pay based on the previous year’s earnings.
What does the tax year mean for pensions?
The tax year end also applies to your annual pension allowance. In terms of tax efficiency, for most people you can put up to £60,000 or 100% of your income (whichever amount is lower) into your personal pension each year. Higher and additional rate taxpayers can claim back even more through HMRC.
It’s important to note that this amount includes all pension contributions — from you, your employer (if applicable), and the government combined.
Just like with your ISA allowance, this pension contribution allowance resets on April 6th of each year, at which point you access your full allowance amount again. Everything you’ve managed to put into your pension will remain tax-free for as long as it stays in your account.
Later down the line, when you start withdrawing from your pension, you’ll receive 25% of the total amount tax-free but the remaining 75% will be charged at the income rate for that amount.
Can I rollover my pension allowance?
Yes! Carrying over your pension allowance is possible if you didn’t use all of your entitlement in the past three years.
If you find yourself with more money than your pension allowance will allow you to (tax-efficiently) pay into yours this year, but you didn’t use the full allowance in the previous few years, you could potentially carry those three years of unused allowance over now.
Read MoneyHelper’s detailed guidance for this here.
Final takeaways
If you leave this article with one date in mind, let it be April 6th!
Remember this date as the start of the tax year and you’ll always be in the know as to when the next tax year will be beginning (unless the British Treasury decides to change things, but it’s unlikely since it’s been this way for over 270 years).
On April 6th:
- Your ISA allowance resets to £20,000 (unless the amount changes).
- The date for recording your Self-Assessment information starts.
- Your pension allowance resets.
Now you know that these run for one year, April 5th is the natural close to the tax year cycle (and your deadline for taking advantage of any tax-efficient benefits you may be entitled to use).
Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.
Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.
Please remember the value of your investments can go down as well as up, and you could get back less than invested. Past performance is not a reliable indicator of future results.
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