By David Prosser
Think of 5 April as a start as well as a stop. Yes, it’s the final day of the 2025-26 tax year. It therefore imposes a deadline for making good use of various tax allowances and reliefs – particularly for savers. But it also represents an opportunity to plan for 2026-27, so that you have every chance to optimise your savings.
For that reason, try to look through the hype that comes with the tax-year end. It’s important not to miss out on savings opportunities that give you access to potentially valuable tax breaks, assuming they’re appropriate for your needs and circumstances. But approach savings as an ongoing strategy for achieving your goals, rather than a series of annual challenges.
Last chance for this year
The immediate priority should be to look at your 2025-26 allowances. In particular, have you used as much of your Individual Savings Account (ISA) allowance as possible? You’re entitled to put up to £20,000 into an ISA each tax year; all income and profit you subsequently earn on this money will be tax-free.
Think of an ISA as a wrapper, rather than as a savings product in its own right: it simply protects all assets inside it from tax. As for what those assets might be, you have a wide range of choices, including stocks and shares, which can be a good way to target long-term financial goals, but come with ups and downs along the way.
Cash Isas are by far the most popular option. These bank and building society accounts pay attractive rates of interest – United Trust Bank, for example, pays up to 3.95% tax-free/AER* (Fixed) a year on its current range of Cash ISAs – with no tax to pay on this income (you can open an account with us for a minimum of £5,000 deposit). Importantly, the rules on cash ISAs are due to change, adding to the importance of making good use of these accounts if they’re right for you. This year, you can use your full £20,000 allowance for a Cash ISA; the same will be true in 2026-27. But from the 2027-28 tax year onwards, the Government is reducing the maximum Cash ISA allowance to £12,000 for savers under the age of 64.
Unused ISA allowances can’t be carried over from one tax year to the next. So any allowance you have remaining for 2025-26 will disappear at midnight on 5 April. Still, as you’re making your ISA plans, don’t overlook other tax allowances linked to savings.
First, the personal savings allowance (PSA) is a tax-free allowance that enables most people to earn some interest with no tax to pay, even outside of a Cash ISA. The PSA varies according to the rate of income tax you currently pay:
- Basic-rate (20%) taxpayers can earn up to £1,000 in savings interest each year with no tax to pay.
- Higher-rate (40%) taxpayers can earn up to £500 in savings interest each year with no tax to pay.
- Additional-rate (45%) taxpayers do not get an allowance.
Aim to factor the PSA into your planning. United Trust Bank’s Easy Access account currently pays 3.75% Gross/AER* (variable) a year for example (minimum £5,000 deposit). If that’s your only savings account and you’re a basic-rate taxpayer, you won’t pay any tax on interest earned on balances of up to £26,667; for higher-rate taxpayers, that figure is £13,334.
In which case, you may choose to use your PSA before worrying about Cash ISAs. On the other hand, governments often change tax rules and allowances; your own circumstances might also change – you could move into a higher income tax bracket, say. Cash ISAs are nice and simple – you don’t have to worry about calculating if and when you might need to start paying tax.
One other allowance to consider is the “starting savings rate”, available to savers who earn less than £17,570 in the current tax year. It enables them to earn up to £5,000 in savings interest completely tax-free, in addition to their personal savings allowance.
More chances next year
Monday 6 April will bring you a new slate of savings tax allowances as the 2026-27 tax year begins – a new £20,000 cash Isa allowance and a new PSA, for example. In both cases, the tax reliefs on offer next tax year will remain unchanged, though don’t lose sight of the lower Cash ISA allowance that takes effect in April 2027.
Equally, don’t feel you have to use your allowances in one go. For many people, drip-feeding smaller sums into savings accounts will be a more realistic option than making a single one-off payment.
Regular savings can work really well, particularly if you automate the process – by setting up a standing order, for example. Small and affordable monthly top-ups to your savings will add up to substantial sums over time, and help you to make good use of your PSA.
One option is to set up a regular payment into an easy access account. As previously mentioned, United Trust Bank’s Easy Access account, currently pays 3.75% Gross/AER* a year annual interest. The rate is variable and you’ll need a minimum starting balance of £5,000, but you can then pay in smaller amounts whenever you like.
Notice accounts can also be a good option – if you’re happy to give notice of withdrawals, you may be able to secure a higher interest rate. United Trust Bank currently pays up to 3.9% Gross/AER* (Variable) annual interest on its 30-Day Notice Account for balances of £10,000 and over, or 3.85% Gross/AER* (Variable) on balances up to £9999.99. Again, you’ll need to open this account with at least £5,000, but you can then make smaller top-up payments as and when you want to.
One final warning. Always read the small print on all savings accounts carefully – check what deposits and withdrawals you can make without penalty, as well as what interest rates are payable at different levels of account balance.
*AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.
Although this article may contain helpful information and tips, these are not personal advice. You may wish to seek advice from a financial advisor if you are unsure what’s best for your own personal circumstances.