Our ...

February 2026 Newsletter

As the new calendar year begins, we begin to think about the end of the current tax year and the various tax planning opportunities to take advantage of before the next tax year begins on 6th April.

Please get in touch with us for help and advice to ensure the most appropriate action for your circumstances.

In this issue:-

Top Up Your ISA
Maximise Your Pension Contributions
Catch Up on Your Missed Voluntary NI Contributions
Inheritance Tax Considerations
Your Capital Gains Tax Annual Allowance

PLEASE NOTE:

These articles do not constitute any form of personal advice or recommendation and are not intended to be relied upon in making (or refraining from making) any investment or financial planning decisions.

Top Up Your ISA

ISAs are still an effective tax free savings vehicle. The current limits are £20,000 per person, £40,000 for a couple, and £9,000 for a Junior ISA. These figures are frozen until at least 2030, and it remains relevant to use the allowance if you can, whilst still at these levels. Remember to top up your ISA before 5th April to avoid losing this tax year’s allowance.

All types of ISA offer four valuable tax benefits:

Interest earned on cash or fixed interest securities is free of UK income tax.
Dividends are also free of UK income tax.
Capital gains are free of UK capital gains tax (CGT).
ISA income and gains do not have to be reported on your tax return.

In addition, flexible ISAs give you the ability to repay withdrawn ISA funds in the same tax year into the same ISA type – but remember to check first whether your ISA allows this.

If you pay income tax at more than the basic rate or have exhausted any of your allowances ISAs can be especially useful.

It is also worth reviewing your existing ISAs, as old cash ISAs offering good rates initially may now be offering lower returns.

Please get in touch with your usual JJFS contact for more information or to discuss further.

Maximise Your Pension Contributions

Making additional pension contributions can be a highly efficient way to minimise your tax liability. Additional and higher rate taxpayers may wish to contribute an amount to maximise tax relief at 40% or 45% and if you have sufficient earnings you can use carry forward to make contributions in excess of the current annual allowance.

Pension contributions can also help to retain your income tax personal allowance if you have income over £100,000, and your child benefit if you have income over £60,000. Contributions can reduce the ‘adjusted net income’ used to assess your eligibility, for example:

Making an individual pension contribution that reduces your income to below £100,000 will restore your full tax-free personal allowance, meaning that the effective rate of tax relief on the contribution could be as much as 60%.

A contribution which brings your income below £60,000 could save up to £3,094 in child benefit for parents with three eligible children.

For couples, consider maximising tax relief at higher rates for both partners. You can top up your partner’s pension to their level of earnings, even if this exceeds the £3,600 allowance. Partners will get tax relief at their own marginal rates of tax.

Pensions are not just for adults. Consider setting up a pension for your child and you can pay up to £2,880 per year, totalling £3,600 with 20% tax relief. There is no minimum age for a child pension and in addition to the 20% tax relief, any growth generated within the pension won’t be subject to income tax or CGT until accessed by the child in future years.

Conversely, if you are already accessing your pension benefits, in some circumstances it may be worth considering making a one off pension income withdrawal to use your remaining Personal Allowance.

Footnote: IHT on Pensions from 2027

Despite the proposed changes in IHT on remaining pension benefits after death, we still believe the tax advantages available justify making contributions. We will, of course, be considering this for all our clients but if you wish to discuss, please contact us.

Deferring Your State Pension

If you are still earning, we are seeing many clients deciding to defer their State Pension, especially if this gets taxed at higher tax rates. However, you could offset the tax and increase personal contributions to your own pension.

The State Pension increase is 5.8% per year of deferral. However, it is likely to take many years before the higher deferred income makes up the total amounts you actually deferred. Generally it is best to draw once it’s available.

Note: Whilst we’re on the subject of pensions, a reminder to check that you have completed a death benefit nomination or reviewed your existing nomination. It is up to you to specify who you wish to receive your pension benefits. Otherwise, if left to the sole discretion of the pension trustees/administrators, the process could take longer and may not reflect your wishes.

For more information or to discuss your own circumstances please get in touch with your usual JJFS contact or email us at justask@jjfsltd.com.

Catch Up on Your Missed Voluntary NI Contributions

Eligibility to the State Pension normally requires a minimum of 10 years contribution history with 35 years needed for the full state pension amount. So if you have missed contributions for any reason you can pay voluntary NI contributions to plug gaps that have arisen in the last 6 years.

The voluntary contribution rates are dependent upon employment status in the missed year. The point of making voluntary National Insurance contributions is to pay a small amount now, so you get more State Pension in the long run. However it can take a number of years to get back what you pay in, so think about how long you’ll expect to get your State Pension for. If you die before reaching State Pension age, you won’t get anything back.

For more information or to discuss your own circumstances please get in touch with your usual JJFS contact or email us at justask@jjfsltd.com.

Inheritance Tax (IHT) Considerations

The three main IHT annual exemptions to consider are:

1) The Annual Exemption. Each tax year you can give away £3,000 free of IHT. You can carry forward if you did not use all the exemption in one tax year but it can only be used after you have used the current tax year’s exemption. For example, if you made no gifts in 2024/25, and you gift £4,000 in 2025/26, you will be treated as having used your full 2025/26 exemption and £1,000 from the previous tax year.

2) The Small Gifts Exemption. You can give up to £250 outright per tax year free of IHT to as many people as you wish, so long as they do not receive any part of the £3,000 exemption.

3) The Normal Expenditure Exemption. This is potentially the most valuable of the yearly IHT exemptions. Any gift – regardless of size – escapes IHT provided that:

you make it regularly;
it is made from your income (including ISA income, but excluding investment bond and other capital withdrawals); and
the sum gifted does not reduce your standard of living.

In addition, parental gifts up to £5,000 for a wedding or civil partnership are exempt. Spouses can also usually gift between each other in order to equalise estates. You can read our factsheet for more information.

For more information or to discuss your own circumstances please get in touch with your usual JJFS contact or email us at justask@jjfsltd.com.

Your Capital Gains Tax Allowance (IHT)

The annual CGT exemption is £3,000 and spouses are taxed independently for CGT purposes. Each spouse has an annual exemption, which can be used before any CGT has to be paid. This is beneficial where assets are held jointly and then sold, as each spouse can use their annual exemption to save tax. However the annual exemption cannot be transferred between spouses and cannot be carried forward to future years: it is either used or lost.

For more information or to discuss your own circumstances please get in touch with your usual JJFS contact or email us at justask@jjfsltd.com.

***The above are articles provide a general overview of the tax saving opportunities available but we highly recommend seeking professional advice before taking any action as your own circumstances can significantly affect the potential opportunities available to you.