With tax year-end approaching, now is a good time to take stock of your finances and ensure you’re making the most of the allowances available to you. The current tax year ends on 5 April 2026, which means there’s still time to act.

Why tax year-end matters for teachers

Tax year-end is an opportunity to review your finances and make sure you’re not missing out on valuable allowances that won’t roll over. For teachers, this can be especially important. We’ve outlined a few of the reasons for this below.

Backdated pay rises

Many teachers have recently received or are due to receive backdated pay. While welcome, this can unexpectedly push you into a higher tax bracket. Planning ahead can help you manage the impact and potentially reduce your tax bill.

Changing circumstances

Career breaks, part-time work, maternity leave or stepping into leadership roles can all affect your tax position and pension contributions. Reviewing your finances annually helps you stay on track.

Multiple income streams

If you earn additional income outside the classroom, for example, through tutoring, exam marking or supply work, you may need to complete a self-assessment tax return. This ensures you’re paying the right amount of tax on all your earnings.

Tax treatment depends on your individual circumstances and may be subject to change in the future.

How can you plan for tax year-end?

The key to planning for tax year-end is to understand what allowances you already have and how to make the most of them. We’ve outlined a few of the areas below where careful planning could make a positive difference to your finances.

1. Consider increasing your pension contributions

Increasing your pension contributions is one of the most tax-efficient ways to save for the future. It can also help reduce your taxable income, particularly if you’re close to entering a higher tax band.

How does this work in practice?

In practice, if you earn £52,000 and increase your pension contributions by £2,000, your taxable income reduces to £50,000. Since the 40% higher rate of tax kicks in at £50,271, increasing your pension contributions may stop you from having to pay more tax. 

This example is based on contributing to your pension scheme via salary sacrifice or a net pay arrangement.

Use your annual allowance

Your annual allowance is the maximum you can contribute to your pension each year without incurring additional tax charges.

Most people can receive tax relief on contributions up to 100% of their earnings, capped at an annual allowance of £60,000 for the 2025/26 tax year. However, if you’re a high earner, your allowance may be tapered to a lower amount.

Carry forward unused allowances

If you haven’t used your full annual allowance in the previous three tax years, you may be able to carry it forward. This is a valuable option for teachers receiving backdated pay or stepping into higher-paid roles.

In practice, this means you might be able to top your pension up with an amount above the regular annual allowance.

Consider AVCs and private pensions

If you are thinking about contributing more to your pension before tax year-end, there’s a couple of ways to do it. As a teacher, you can increase your pension savings by making additional voluntary contributions (AVCs) or by opening a private pension.

Most private pensions and AVCs are defined contribution schemes which means the money you put into them is invested for you to gradually build your pot over time. Your main Teachers’ Pension Scheme (TPS) differs in that it is a defined benefit scheme providing a guaranteed income in retirement.

2. Use your ISA allowance

ISAs are another powerful way to save or invest tax efficiently. The current ISA allowance is £20,000, which can be split across different types of ISAs.

Why ISAs matter

Any interest or investment returns within an ISA are completely tax-free. In a standard savings account, interest counts as income and may be taxed, but ISAs protect your returns.

Types of ISAs include:

• Cash ISAs: Ideal for short-term savings or emergency funds
• Stocks & Shares ISAs: Suited to longer-term goals, with potential for higher returns
• Lifetime ISAs (LISAs): Capped at £4,000 per year, with a government bonus. LISAs can only be used to help towards the purchase of your first home or to save for retirement
• Junior ISAs: Up to £9,000 per year for children or grandchildren (this doesn’t affect your own allowance)

From April 2027, the overall ISA allowance will remain at £20,000, but cash ISAs will be capped at £12,000 for those under 65. The remaining £8,000 can be invested through a Stocks & Shares ISA. Planning ahead now can help you to adjust smoothly.

If your spouse or partner hasn’t used their ISA allowance, together you could invest up to £40,000 tax efficiently.

The value of investments can go down as well as up and you may get back less than you invest.

3. Consider or declare gift giving

Gift allowances can be a useful part of your tax planning too.

• You can gift up to £3,000 each tax year without it being added to your estate for inheritance tax purposes.
• If you didn’t use last year’s allowance, you can carry it forward, potentially gifting up to £6,000.

So, you could help your children or other family members with the cost towards a first home or a wedding, while potentially reducing inheritance tax.

In addition, charitable donations can reduce your taxable income, which may help higher earners stay below the additional-rate threshold of £125,140 for 2025/26.

What should you do now?

If you’re unsure where to start with your tax year-end planning, speaking to a financial expert can help you make sense of your options.

The Specialist Financial Advisers at Wesleyan Financial Services work with teachers every day. They understand the Teachers’ Pension Scheme, the financial challenges educators face, and the opportunities available to you.

They can help you to:

• Review your current financial position
• Understand your allowances
• Explore pension and ISA options
• Make confident decisions before the tax year ends

Book an appointment with one of their experts today to get ahead of your tax year-end planning.

Please note: Advice charges may apply. You will not be charged until you have agreed the services you require and the associated costs. Learn more about our charges here.

This article is brought to you by Wesleyan Financial Services, to find out more about us, visit our website www.wesleyan.co.uk

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