With the end of the tax year fast approaching, employees still have time to review their finances and take full advantage of the allowances available to them. As allowances continue to shrink, tax rates rise and further changes approach, effective tax planning is becoming increasingly important for employees.

To help employees take action before the end of the tax year, WEALTH at work has outlined the key tax and savings changes that employer can support the workforce with.

A changing tax landscape

People now face a rapidly shifting environment when it comes to allowances and tax rules. The tax‑free dividend allowance has fallen sharply from £5,000 in 2017/18 to just £500 today. At the same time, the Capital Gains Tax (CGT) exemption has decreased from £12,300 in 2022/23 to £3,000, and CGT rates rose in October 2024 to 18% for basic rate taxpayers and 24% for those paying above the basic rate. Elevated interest rates have also resulted in more savers exceeding their Personal Savings Allowance - the amount of tax-free interest that can be earned on savings each tax year (set at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers), leading to unexpected tax bills for many.

Further tax changes on the horizon

There are more tax changes coming over the next two years. From April 2026, dividend tax rates will increase from 8.75% to 10.75% for basic rate taxpayers, 33.75% to 35.75% for higher rate taxpayers, while the additional rate dividend tax will remain at 39.35%.

From April 2027, savings income tax rates - the rates of income tax applied to interest earned on savings once tax‑free allowances are exceeded - will also rise. They will increase from 20% to 22% for basic rate taxpayers, 40% to 42% for higher‑rate taxpayers and 45% to 47% for additional‑rate taxpayers.

ISA allowances: still valuable but changing

ISAs remain one of the most effective ways for people to shelter their savings and investments from tax, with the current £20,000 annual allowance protecting income from interest - meaning any interest earned on savings held within the ISA is completely tax‑free, as well as dividends and capital gains. However, this landscape is due to change. From April 2027, individuals under the age of 65 will be limited to £12,000 in Cash ISA contributions, while those aged 65 and over will retain the full £20,000 limit. Although the overall ISA allowance will stay frozen at £20,000 until at least 2031, a greater portion will need to be directed into investment‑based ISAs rather than cash. This means employees should review their finances before 5 April to ensure they do not miss out on valuable tax benefits.

Key considerations for employees ahead of the tax year end

Jonathan Watts‑Lay, Director, WEALTH at work, comments: Employees may benefit from looking at maximising their ISA contributions and reviewing any savings held outside tax‑advantaged accounts. It may also be sensible to use any remaining allowances and reliefs, assess their exposure to dividend and savings income taxes, and prepare for the upcoming changes to limits and rates before the year‑end deadline.

 Why workplace support is essential

Watts-Lay comments; “An increase in taxes and reduction in allowances means that people will have less money in their pocket, making it more important than ever for employees to take control of their finances and maximise any income or savings they have through careful tax planning. Many workplaces provide staff with financial education, guidance and access to investment advice to help them understand how tax changes may affect their finances. They may also provide access to tax‑efficient savings options such as Workplace ISAs which can help build financial resilience. Now is the time to take action to support your employees.”

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