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Five UK Tax Allowances That Reset Each Year and Are Lost If Unused
Hoxton Blog • Five UK Tax Allowances That Reset Each Year and Are Lost If Unused
As the end of the UK tax year approaches, many people rush and lose the ability to use their allowances - assuming they can simply be addressed later. But in reality, several UK tax allowances reset each year and are no longer available once the deadline passes.
For UK residents, these allowances form part of the framework for long-term tax planning.
Missing them does not usually create an immediate issue, but over time it can reduce flexibility and lead to higher levels of tax than might otherwise have applied.
This article outlines a number of UK tax allowances that reset on 5 April, explains how they operate, and highlights why reviewing them ahead of the tax year end can be helpful.
Why the UK Tax Year End Matters
The UK tax system operates on an annual cycle running from 6 April to 5 April. While some reliefs allow limited carry forward, others do not.
Where allowances are not used within the relevant tax year, they may no longer be available in future years.
This is not about acting purely because of a deadline. Instead, the tax year end provides a natural opportunity to review allowances and ensure decisions are made consciously, rather than as a result of oversight.
ISA Allowance
The ISA (Individual Savings Account) allowance is a widely used feature of UK tax planning, but it is also one that is frequently underutilised.
Each individual can contribute up to £20,000 per tax year into ISAs. Any unused ISA allowance does not carry forward to future tax years.
You can split this £20,000 across different ISA types as you choose, but you cannot exceed £20,000 in total in one tax year.
Main ISA options that count toward the £20,000 allowance
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Cash ISA
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A tax-free savings account where you earn interest without paying tax.
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You can put up to £20,000 into Cash ISAs (subject to future rule changes from April 2027 for under-65s – see note below).
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Stocks and Shares ISA
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Money is invested in stocks, shares, funds, etc., and any returns (dividends/capital gains) are tax-free.
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You can contribute up to the full £20,000.
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Innovative Finance ISA (IFISA)
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For peer-to-peer loans and some other alternative finance investments.
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Contributions count toward the £20,000 limit.
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Lifetime ISA (LISA)
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Designed for first-time home purchases or retirement.
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You can contribute up to £4,000 per tax year; this £4,000 counts within your overall £20,000 ISA allowance.
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Example split of the allowance
Here’s how you could use your £20,000 in one tax year:
- £8,000 in a Cash ISA
- £6,000 in a Stocks and Shares ISA
- £2,000 in an IFISA
- £4,000 in a Lifetime ISA
= £20,000 total
Assets held within ISAs are sheltered from UK income tax and Capital Gains Tax, which can make them a useful long-term planning tool when used appropriately.
ISA allowances are often missed because cash is held outside tax-efficient wrappers, contributions are not reviewed regularly, or cash ISA arrangements are assumed to be sufficient.
For couples, each partner has their own ISA allowance, and one person’s unused allowance cannot be transferred to the other.
Capital Gains Tax Allowance
The Capital Gains Tax annual exemption allows individuals to realise up to £3,000 of gains per tax year without incurring CGT.
This exemption has reduced in recent years and resets each tax year, with no ability to carry unused amounts forward.
CGT considerations commonly arise for UK residents holding investments outside ISAs and pensions, or other tax efficient wrappers.
Gains may accumulate over time without triggering tax until a disposal takes place.
Using the exemption does not necessarily require large or entire disposal. In some cases, partial disposals, rebalancing or spreading transactions across tax years may be considered as part of wider planning.
It is important however that when considering which assets to sell, to benefit from the allowance, that investment considerations are made; selling shares for example, simply to benefit from the allowance, would not be prudent as the same shareholding cannot be invested in within 30 days.
Dividend Allowance
The UK dividend allowance permits individuals to receive up to £500 of dividend income per tax year before dividend tax applies.
This allowance resets annually, and any unused portion is not available in later years.
Dividend income may arise from investment portfolios, shareholdings held outside tax wrappers, or family or personal companies. If you are not investing in dividend producing investments, this allowance will always be lost.
Personal Savings Allowance
The personal savings allowance allows basic and higher-rate taxpayers to earn a set amount of interest each tax year without paying income tax. The allowance does not apply to additional-rate taxpayers.
With higher interest rates, more individuals now exceed this allowance through ordinary cash holdings.
The personal savings allowance applies on a tax-year basis, does not carry forward, and interacts with other sources of taxable income.
In some cases, individuals with lower non-savings income may also be eligible for the starting rate for savings, although this reduces as income increases.
Interest is often credited automatically, meaning any resulting tax liability may only become apparent later. Reviewing cash holdings as part of a wider financial picture can help avoid unintended outcomes.
Inheritance Tax Gifting Allowances
A number of Inheritance Tax gifting allowances operate on an annual basis.
The £3,000 annual gifting exemption allows individuals to make gifts each tax year, up to the value of the allowance, that falls immediately outside their estate for IHT purposes. One unused year can be carried forward, but only for a single tax year.
If unused beyond that limited carry-forward period, the allowance is no longer available.
This means timing can still play an important role, even though there is slightly more flexibility than with some other allowances.
Other exemptions, such as small gifts and gifts made out of surplus income, are also commonly overlooked, particularly where gifting is informal and not linked to a wider estate plan.
Bringing the Allowances Together
Each allowance is relatively straightforward on its own. The complexity often arises because they apply across different assets, income sources and objectives.
The aim is not to use every allowance each year, but to ensure those that reset annually are reviewed intentionally and in the context of longer-term planning.
Regular reviews can help identify allowances that may no longer be available once the tax year ends, areas where inaction could limit future options, and how tax considerations fit within wider financial goals.
Turning Awareness into Action
Understanding which allowances reset each year is only the first step. The harder part is knowing which ones actually matter for you, and how they fit alongside income, investments, cash flow and longer-term objectives.
For many people, allowances are missed not because they are unaware of them, but because they sit across different accounts, tax categories and time horizons. ISAs may be held with one provider, taxable investments with another, and gifting decisions made informally without being viewed through an estate-planning lens.
This is where structured support can make a difference. A joined-up review can help bring these moving parts together, highlight which allowances are relevant in the current tax year, and provide clarity on the potential implications of acting or not acting before 5 April.
At Hoxton Wealth, conversations with clients often focus on creating that clarity. Rather than working through allowances in isolation, the emphasis is on understanding the wider financial picture and identifying practical next steps that align with individual circumstances and longer-term plans.
For those unsure whether action is needed or simply wanting reassurance that nothing important has been overlooked, speaking to an adviser can help turn year-end awareness into informed, considered decisions rather than last-minute pressure.
If you would like to review how the end of the tax year applies to your situation or discuss how these allowances fit within your wider financial arrangements, Hoxton Wealth can help guide that conversation.
Important Information
This article is for general information purposes only and does not constitute personal financial, tax or investment advice. Tax rules and allowances are subject to change, and their application depends on individual circumstances.
Before taking any action, you should consider whether the information is appropriate to your situation and seek professional advice where necessary. Past performance and tax efficiency are not reliable indicators of future outcomes.
To read more about the end of the UK tax year, download our handy checklist here.
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