Tax Year Timing

The UK tax year runs from 6th April to 5th April. Not calendar year. Not any sensible timeframe. April to April. This quirk of history affects multiple aspects of your finances, and understanding the timing lets you take advantage of annual allowances and avoid missing opportunities.

Most employed people don't need to think about tax years much—PAYE handles it automatically. But anyone with savings, investments, self-employment income, or financial planning goals needs to understand how annual allowances work and when they reset.

ISA Allowances Reset

You can put £20,000 into ISAs each tax year. On 6th April, you get a fresh £20,000 allowance. Anything you didn't use from the previous year is gone—you can't carry it forward.

This creates a "use it or lose it" situation. If you've got spare money in March and plan to save it anyway, putting it into an ISA before 5th April uses this year's allowance. After 6th April, you can use next year's allowance for additional savings.

This isn't about gaming the system. It's about not wasting tax-free space. Money in an ISA grows tax-free forever. Money outside an ISA faces potential tax on interest, dividends, or capital gains. Using your allowance fully each year maximises the tax-free wrapper you'll have in future. (See The ISA Wrapper & Understanding Risk for complete detail on ISAs and how to use them.)

Pension Annual Allowance

You can contribute up to £60,000 into pensions each tax year (including employer contributions) and receive tax relief. This also resets on 6th April.

Unlike ISAs, you can carry forward unused pension allowance from the previous three tax years. If you didn't use your full allowance last year, you can use it this year on top of this year's allowance. This is useful for people with variable income who want to make large pension contributions in high-earning years. (For full detail on pension allowances and how to use them effectively, see Pensions Demystified.)

Example: You've only contributed £10,000 annually for the past three years, leaving £50,000 unused allowance each year. This year you get a £90,000 bonus. You could contribute up to £60,000 (this year) + £50,000 + £50,000 + £50,000 (carried forward) = £210,000 into your pension and get tax relief on all of it.

This requires good record-keeping and often professional advice to get right. But it's valuable for self-employed people or anyone with lumpy income.

Capital Gains Tax Allowance

Each tax year, you can make up to £3,000 in capital gains without paying tax (reduced from £6,000 in previous years, and likely to change again). This applies to profits from selling investments, property (excluding your main home), or other assets.

If you're holding investments outside ISAs and they've grown significantly, you might want to realise some gains before the end of the tax year to use your allowance. Sell investments up to the £3,000 gain limit, immediately rebuy them. You've used this year's allowance, reset the cost base, and reduced future tax.

This is called "bed and breakfasting" and it's entirely legal. It only makes sense if you've got gains to realise and you're planning to hold the investments anyway. Don't create transaction costs just to use a tax allowance—but if you've got meaningful gains, using the allowance is sensible.

Self-Assessment Deadlines

If you complete a self-assessment tax return (because you're self-employed, have rental income, or earn above £100k), you need to understand the deadline structure:

Paper return: Due by 31st October following the end of the tax year. So for the 2024/25 tax year (ending 5th April 2025), paper deadline is 31st October 2025.

Online return: Due by 31st January following the end of the tax year. For 2024/25 tax year, online deadline is 31st January 2026.

Payment: Any tax owed is due by 31st January as well. If you owe more than £1,000, you also need to make a "payment on account" for next year—50% of what you owed, due by 31st January and another 50% by 31st July.

Missing these deadlines means automatic penalties plus interest. File on time even if you can't pay immediately—penalties for late filing are worse than penalties for late payment.

Planning Bonus and Income Timing

If you have any control over when you receive income, tax year boundaries matter. Receiving a bonus in March (current tax year) versus April (next tax year) can affect which year it's taxed in.

This particularly applies to self-employed people who can sometimes control when they invoice or when they take income from their business. If you're close to a tax threshold, spreading income across two tax years rather than taking it all in one might reduce overall tax.

Example: You're at £48,000 income. Any more tips you into 40% tax. If you can defer £10,000 of income until the next tax year, you pay 20% on it instead of 40%. That's £2,000 saved.

This requires planning and often professional advice. Don't make decisions purely for tax reasons if they're bad for your business or cash flow. But if timing is flexible, understanding tax year impact is valuable.

Pension Contributions and Tax Relief

When you make pension contributions affects which tax year they count for. If you're employed and contributions come through salary sacrifice, they count for the tax year you earn the salary. Straightforward.

If you're making personal pension contributions or are self-employed, the date you make the contribution determines which tax year it counts for. Contribution on 4th April counts for current tax year. Contribution on 7th April counts for next tax year.

This matters if you're trying to use all your annual allowance or carry-forward. Make sure contributions hit your pension provider before 5th April if you want them to count for the current year.

Employment Benefits and P11D

If you receive employment benefits (company car, private medical insurance, etc.), these are reported on a P11D form after the end of the tax year. Your employer has until 6th July to submit this.

Tax on benefits is usually collected by adjusting your tax code for the following year. So benefits received in 2024/25 tax year typically affect your tax code from September 2025 onwards, and you gradually pay the tax through reduced tax-free allowance.

This means a timing quirk: you get the benefit during one tax year, but pay the tax over the following tax year. Just be aware this is how it works so you're not surprised by tax code changes.

Savings Interest and Dividend Tax

Interest and dividends are taxed in the tax year you receive them. If you're close to your Personal Savings Allowance (£1,000 for basic rate taxpayers) or Dividend Allowance (£500 from 2024/25), timing large interest payments or dividend payments across tax years might reduce tax.

This is difficult to control for most people—you can't dictate when banks pay interest or companies pay dividends. But if you're in control (for example, deciding when to take dividends from your own company), tax year timing matters.

Why 6th April?

Historical quirk. Britain used to start the year on Lady Day (25th March). When the calendar changed from Julian to Gregorian in 1752, they added 11 days. The old tax collection dates got shifted by 11 days to match, moving from 25th March to 5th April. The new tax year then starts the day after.

It's absurd. Everyone agrees it should be calendar year like most countries. But changing it would be complex and expensive, so we're stuck with April to April. Accept the oddity and work within it.

State Benefits and Tax Year

Many state benefits and thresholds change on 6th April. State pension increases. Universal Credit thresholds adjust. Income tax personal allowance sometimes changes. These adjustments happen tax year boundaries, not calendar year.

If you're receiving benefits or close to income thresholds that affect benefit entitlement, be aware that changes happen in April. Your financial position on 5th April might be different from 7th April due to threshold changes.

Tax Year Planning Checklist

Things to check before each tax year ends (by 5th April):

ISA allowance: Have you used your £20,000? Even partial use is worthwhile.

Pension contributions: Are you maximising employer match? Using carry-forward if applicable?

Capital gains: Any gains to realise within your £3,000 allowance?

Gift allowances: £3,000 annual gift allowance for inheritance tax planning (if relevant).

Self-assessment: If you need to file, have you done it? Deadline is 31st January but earlier is better.

Charitable donations: Gift Aid claims need to be in correct tax year.

Not all of these apply to everyone. But knowing which ones matter for your situation means you don't waste allowances or miss opportunities.