The end of the tax year is a crucial date in the calendar, as there are many allowances and exemptions you need to use to maximise opportunities for tax efficiency.
The beginning of the new tax year is equally important if you want to stay on top of your finances. As soon as 6 April rolls around, you may want to start planning to avoid a rush to organise everything in the last few weeks of the tax year.
If you are looking ahead to the coming financial year, make sure to avoid these common tax errors that could cost you.
1. Not using your ISA allowance right away
ISAs are a useful tax wrapper, allowing you to generate interest on your cash savings and grow your investments without tax.
Each year, you can pay in £20,000 across all your ISAs, and you’ll want to use as much of this allowance as possible to take full advantage of the tax benefits.
You might assume that, as long as you use the allowance before it resets at the end of the tax year, the timing isn’t that important, and you wouldn’t be alone.
Many people rush to use their remaining ISA allowance right at the end of the tax year. Indeed, the Guardian reports that, in April 2025 alone, savers paid £14.5 billion into Cash ISAs – the highest monthly total since April 1999.
However, if you’re investing in a Stocks and Shares ISA, waiting until the last minute could make a significant difference to your returns.
Figures from Vanguard show that if you invested £20,000 in your ISA on the first day of the tax year for 25 years, you’d have £1,002,269. This assumes annual returns of 5% after fees.
Meanwhile, if you invested the same amount but waited until the last day of the tax year, you would have £954,542 after 25 years.
This means that you would be almost £50,000 worse off, even though you invested the same amount, because of the timing.
The reason for this is that, when you contribute at the start of each tax year, you give your investments more time to grow. In the long term, this can make a significant difference to the size of your portfolio.
That’s why you may want to start contributing to your ISA as early as possible in the tax year. Even if you don’t invest the full £20,000 right away, making regular payments earlier in the year could increase your returns.
Starting early also means you can spread your contributions throughout the year, making it easier to fit them into your budget and take full advantage of your ISA allowance.
2. Selling assets without considering your Capital Gains Tax Annual Exempt Amount
When you sell certain assets, such as investments held outside an ISA, you might pay Capital Gains Tax (CGT) on the profits you make.
Fortunately, you have an Annual Exempt Amount of £3,000, which resets each tax year. Any profits up to this amount are free from CGT.
Another common mistake you could make this tax year is selling assets without considering how to make the most efficient use of your Annual Exempt Amount.
For instance, if you purchased some non-ISA investments for £5,000 and later sold them for £10,000, you’d make a profit of £5,000.
After applying the Annual Exempt Amount, the remaining £2,000 would be taxable.
However, if you split the sale across two tax years, you would only make £2,500 profit in each year. As this is within your Annual Exempt Amount, you wouldn’t pay CGT.
This is a simple example of how careful planning can help you mitigate CGT.
So, instead of considering a single sale, think about all the assets that you want to liquidate throughout the coming tax year. That way, you can time sales carefully and use the Annual Exempt Amount to your advantage.
3. Overlooking tax on your cash savings interest
As certain tax thresholds have been frozen in recent years, while interest rates have risen, the number of people paying tax on their cash savings interest is increasing.
Any interest that exceeds your Personal Savings Allowance (PSA) is subject to Income Tax. As of 2026/27, the PSA is:
- £1,000 for basic-rate taxpayers
- £500 for higher-rate taxpayers
- £0 for additional-rate taxpayers.
According to Moneyfacts, the number of savers paying tax increased from 1.27 million in 2022/23 to 2.79 million in 2025/26.
Unfortunately, it’s easy to overlook the tax you owe on your cash savings interest. While HMRC may contact you to inform you of an impending tax bill, the Association of Taxation Technicians reported in 2025 that approximately 20% of savings accounts couldn’t be matched to an individual.
As the responsibility falls to you to calculate and pay tax, you could face penalties if you overlook tax on your cash savings interest.
As such, you must calculate any tax that you might owe on your cash savings interest. Also, if you find that you face a large bill, you could consider more tax-efficient ways to hold your savings, such as an ISA.
Get in touch
If you want to get a head start on tax planning for the year and avoid any mistakes, we can support you.
Please get in touch to find out how our team of VouchedFor Top Rated planners could help today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.