What UK Contractors Need to Do Before 5 April

Although 01 January is an ideal time to crack into your new years resolutions, around March each year is a good time to enact some tax year resolutions.

In the UK, the end of the tax year is 05 April 2026, which is now only five weeks away. The UK tax year is about to reset, and a surprising number of allowances, reliefs, and planning opportunities are about to vanish for another twelve months.

This isn’t a “do everything on this list or you’re in trouble” kind of article. It’s more of a guided walk through the things that genuinely matter for contractors, freelancers, and sole traders before the tax year ends. Some of these apply to everyone. Some are especially relevant if you’re a Kiwi or Aussie expat. All of them are easier to deal with now than in hindsight.

So grab a coffee or a matcha latte and lets resolve some resolutions.

Why the 5-Week Sprint Matters

The UK personal tax year runs from 6 April to 5 April. That means 5 April 2026 is the finish line for the 2025/26 tax year, and when it passes, several valuable allowances simply disappear. Your ISA allowance? Gone. Unused pension annual allowance from 2022/23? Expired. The chance to time a dividend into the current tax year at today’s rates? Missed.

For most UK-based contractors and sole traders, the final few weeks of the tax year are where small, deliberate decisions can make a real difference to the tax bill. Not aggressive planning. Just sensible, timely action.

If you’re an Aussie, you’ve got an extra layer of complexity. Australia’s tax year runs from 1 July to 30 June. It does not line up neatly with the UK, which means income, interest, and foreign tax credits need to be allocated to the right year and converted at the right exchange rates. It’s not dramatic, but it does catch people out when they’re not expecting it.

The good news is that none of this is complicated once you know what to look for. Here are the key areas to focus on.

ISAs: The Tax-Free Wrapper You Can’t Carry Forward

If there’s one thing to do before 5 April, it’s this: check whether you’ve used your ISA allowance.

For the 2025/26 tax year, you can save up to £20,000 across your ISAs. That covers Cash ISAs, Stocks and Shares ISAs, Lifetime ISAs, and Innovative Finance ISAs. The total across all of them can’t exceed £20,000, but since the rule changes in April 2024, you can now open more than one ISA of the same type in the same year. That means you can spread your money across providers to chase better rates without worrying about the old one-per-type restriction.

The critical point is that this allowance does not carry forward. If you only use £5,000 of it this year, the remaining £15,000 is lost on 6 April. There’s no rolling it into next year. It’s genuinely use it or lose it.

For contractors who’ve had a decent year and are sitting on surplus cash, the ISA is one of the cleanest tax shelters available. Interest earned in a Cash ISA is completely free of income tax. Dividends and capital gains in a Stocks and Shares ISA are free of dividend tax and CGT. And none of it needs to appear on your Self Assessment tax return. That last point alone saves a surprising amount of hassle.

The Bed and ISA Move

If you hold investments outside an ISA, in a General Investment Account for example, there’s a tidy year-end move worth knowing about. You can sell investments, realise any gains within your annual CGT exempt amount (currently £3,000 for individuals), and then repurchase the same investments inside your ISA. This is known as a “Bed and ISA” transfer.

The benefit is twofold. You’ve used your CGT exemption, which also doesn’t carry forward, and you’ve moved assets into a wrapper where all future growth is tax-free. If you’re thinking about doing this, check the deadlines with your investment platform. Some providers have cut-off dates in late March for Bed and ISA transfers to settle before 5 April.

The Expat Angle: What Happens When You Leave the UK

Here’s something that matters if you’re a Kiwi or Aussie who might head home in the next year or two. Once you leave the UK and become non-resident, you can keep your existing ISAs, and they’ll continue to grow tax-free under UK rules. But you can’t add new money to them while you’re non-resident.

That makes this tax year potentially your last practical window to use the full £20,000 allowance before non-residence blocks new subscriptions. If returning home is on the cards, there’s a strong argument for making the most of it now.

However the ISA wrapper is a UK concept. New Zealand’s Inland Revenue and the Australian Taxation Office don’t recognise it. Once you’re tax resident back in NZ or Australia, your ISA will generally be treated like any other foreign investment account. In New Zealand, that often means the Foreign Investment Fund rules apply, with the Fair Dividend Rate method potentially deeming a taxable return on your offshore shares. In Australia, temporary residents on certain visas may get some relief from foreign income tax, but it depends on your visa status and the specifics.

That said, New Zealand does offer a four-year temporary tax exemption for certain new or returning residents on most foreign income. If you qualify, there can be a window where your ISA growth is effectively sheltered on both sides. Worth understanding before you make any big moves.

None of this means you should cash out your ISA before leaving. Years of accumulated allowances are valuable. But it does mean planning the transition into local tax-efficient structures like KiwiSaver or Australian Superannuation is part of the bigger picture.

The Quiet Tax Trap: Overseas Bank Interest and Foreign Income

We’ve written about this before, but it’s worth repeating because it catches people every single year. If you’re a UK tax resident with a savings account, term deposit, or any interest-bearing account in New Zealand or Australia, that interest is part of your UK taxable income. Even if the bank back home has already deducted tax.

The End of the De Minimis Exemption

Until April 2025, there was a helpful simplification. If your total foreign income was under £2,000 and you didn’t bring it into the UK, you didn’t have to include it on your tax return. That’s gone. The UK replaced the old remittance basis with the new Foreign Income and Gains regime from 6 April 2025, and with it, that quiet little exemption disappeared.

The 2025/26 tax year, the one ending on 5 April 2026, is the first full year where the operational impact of this change will be felt by most people. Even modest amounts of overseas interest now need to be reported on a UK Self Assessment return. And HMRC isn’t guessing. The Common Reporting Standard means the ATO and NZ’s Inland Revenue are automatically sharing account balances, interest, and dividend data with HMRC. If there’s a mismatch between what they receive and what you’ve declared, you can expect a letter.

Check Your Bank’s Withholding Settings

This is one of the simplest and most impactful things you can do before the tax year ends. Contact your bank back home and make sure they know you’re a UK resident.

In New Zealand, banks often continue deducting Resident Withholding Tax at rates of 30–33% unless you tell them you’ve moved. Once they know you’re non-resident in NZ, the rate should drop to the 10% Non-Resident Withholding Tax rate under the UK-NZ Double Taxation Agreement. Some banks will also offer the option of the 2% Approved Issuer Levy instead of NRWT.

Be careful with the AIL option, though. While 2% sounds much better than 10%, HMRC doesn’t recognise AIL as an income tax. That means you can’t use it as a Foreign Tax Credit against your UK liability. You end up paying the 2% levy in New Zealand and then the full UK tax on top. It’s one of those quiet costs that compounds over time without anyone noticing.

In Australia, the risk is different but equally real. If your bank doesn’t have correct residency and address details, they may apply default withholding at rates as high as 47%. A quick call to update your details can prevent that.

Pensions: The Biggest Lever for High-Earning Contractors

If ISAs are the cleanest tax shelter, pensions are the most powerful. And for higher-earning contractors, the numbers involved can be significant.

The pension annual allowance for 2025/26 is £60,000. That’s the maximum you can contribute and still receive tax relief. Contributions are tax-deductible at your highest marginal rate, so a higher-rate taxpayer effectively pays just £600 for every £1,000 that goes into the pension. That’s hard to beat.

Carry Forward: Don’t Leave Unused Allowance on the Table

Here’s where it gets interesting. If you didn’t use your full pension annual allowance in any of the previous three tax years, you can carry that unused amount forward and use it this year. For someone who’s had a few quieter years followed by a big contract, this can open up a very large contribution window.

The catch is that you must have been a member of a registered UK pension scheme during any tax year you’re trying to carry forward from. If you weren’t a member at all in 2022/23, you can’t reach back and grab that year’s unused allowance. And there’s a deadline pressure here: unused allowance from 2022/23 expires on 5 April 2026. After that, it’s gone for good.

If you run your own limited company and you’re not auto-enrolled (which is common for single-director companies), this is a deliberate decision. Nobody’s doing it for you. If the money is sitting in the business bank account and you’ve got the headroom, the tax year end is the prompt to act.

The 60% Tax Trap and Why Pensions Can Fix It

This is one of the most commonly misunderstood parts of UK tax. If your adjusted net income sits between £100,000 and £125,140, you’re in the personal allowance taper zone. For every £2 you earn above £100,000, you lose £1 of your £12,570 personal allowance. That creates an effective marginal tax rate of around 60% in that income band.

Pension contributions can pull your adjusted net income back below £100,000, restoring your full personal allowance. The return on that contribution is genuinely outsized. You’re getting tax relief on the contribution itself, plus you’re recovering the personal allowance that would otherwise have been clawed back. It’s one of the most efficient planning moves available to UK contractors.

For parents, there’s a further benefit. The High Income Child Benefit Charge kicks in on earnings above £60,000, and pension contributions that reduce your adjusted net income below that threshold can eliminate the charge entirely.

Watch Out for the Tapered Annual Allowance

If you’re earning significantly more, be aware that the pension annual allowance is tapered for very high earners. Once your adjusted income exceeds £260,000 (and your threshold income exceeds £200,000), the £60,000 allowance starts to reduce. It can drop as low as £10,000.

This matters for contractors because income can be lumpy. A big contract extension, a one-off dividend from company reserves, or the sale of shares can push you into taper territory in a single year, even if that’s not your norm. If that’s a possibility this year, it’s worth checking before making a large pension contribution.

Limited Company Contractors: Year-End Profit Extraction

If you operate through your own limited company, the 5-week sprint is about controlling how and when profits leave the business.

Dividend Timing and the April 2026 Rate Rise

The dividend allowance for 2025/26 is frozen at £500. Beyond that, dividends are taxed at 8.75% for basic-rate taxpayers and 33.75% for higher-rate taxpayers. Those are the current rates.

From 6 April 2026, those rates are going up. The basic rate rises to 10.75%, and the higher rate to 35.75%. That’s a meaningful increase, especially if you’ve got retained profits sitting in the company.

If you’ve been thinking about declaring a dividend, doing it before 5 April locks in the current lower rates.

Business Asset Disposal Relief: The Window Is Closing

If you’re thinking about winding up your company, Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) is on the clock. BADR currently gives qualifying business owners a reduced CGT rate of 14% when distributing company assets on liquidation.

From 6 April 2026, that rate rises to 18%. If you’re in the process of closing a company and distributing reserves, the funds need to be in your personal account before 5 April to secure the 14% rate. Starting the liquidation process in February or March is considered high-risk due to banking and administrative delays. If this applies to you, the safe window was January. If you haven’t started yet, talk to your accountant immediately.

Sole Traders: Get Your House in Order for MTD

If you’re a sole trader, the big structural change isn’t a year-end allowance. It’s what’s coming on 6 April 2026: Making Tax Digital for Income Tax.

From that date, sole traders and landlords with total business or property income over £50,000 must keep digital records and file quarterly updates with HMRC. The threshold drops to £30,000 from April 2027. This is a fundamental shift from the old system of a single annual Self Assessment return to a more regular reporting cycle.

The year-end sprint for sole traders is less about using up allowances and more about making sure your systems are ready. If you’re still using spreadsheets or adding up bank statements manually, now is the time to move to MTD-compatible software. That’s where Joy Pilot comes in. We built it specifically for UK sole traders, and it’s designed to make MTD compliance feel like a natural part of running your business rather than an extra burden.

Even if you’re below the £50,000 threshold for April 2026, the direction of travel is clear. Getting into good digital habits now, regular invoicing, tracking expenses as they happen, reconciling monthly, will make the transition painless when your threshold arrives.

Year-End Expense Review

Before you close out the tax year, take an hour to review your expenses. If you work from home, HMRC allows you to claim a reasonable proportion of household costs, either by apportioning actual costs or using simplified flat-rate expenses. The simplified expenses approach is straightforward: you use HMRC’s flat rates based on hours worked from home and apply them at the end of the tax year when working out your Self Assessment expenses.

It’s not going to change your life, but it’s money left on the table if you don’t claim it. And it’s far easier to sort out now than to try and reconstruct your working patterns ten months from now.

The Bits That Are Easy to Miss

There arealso a handful of smaller moves that are worth checking off before 5 April.

VAT Threshold Check

If you’re a sole trader or freelancer approaching the £90,000 VAT registration threshold, the end of the tax year is a good moment to review your rolling 12-month turnover. Crossing the threshold triggers a mandatory registration, and HMRC expects you to register within 30 days. Getting caught by surprise on this one is easily avoided with a quick check.

Marriage Allowance

If you’re married or in a civil partnership and one of you earns less than the £12,570 personal allowance while the other is a basic-rate taxpayer, you can transfer £1,260 of unused allowance to the higher earner. That’s a tax reduction of up to £252 per year. It’s not life-changing, but it’s free money that a surprising number of people don’t claim. It can also be backdated for up to four years.

Gift Aid for Income Management

If you make charitable donations through Gift Aid, those donations can be used to reduce your adjusted net income. For someone sitting just above the £100,000 personal allowance taper, a timely Gift Aid donation can bring income back below the threshold and restore the full allowance. It works the same way as pension contributions for this purpose, and it’s explicitly included in HMRC’s adjusted net income calculation.

Inheritance Tax: Annual Gifting

Each individual has an annual IHT gifting exemption of £3,000. If you didn’t use last year’s, you can carry it forward for one year, giving you up to £6,000 to gift this year. For couples, that’s potentially £12,000 between you. These gifts are immediately outside your estate for inheritance tax purposes, which means they’re not caught by the usual seven-year survival rules. It’s a small annual action that compounds over time.

Five Weeks. A Few Smart Moves. A Lot Less Stress.

The 5-week sprint isn’t about panic. It’s about taking a few hours to review where you stand and making sure you’re not leaving money, allowances, or planning opportunities on the table.

If you’re a contractor running a limited company, the dividend timing and pension strategy are the big levers. If you’re a sole trader, it’s about getting MTD-ready and tidying up your expenses. If you’re a Kiwi or Aussie, it’s all of the above, plus making sure your overseas bank settings aren’t quietly costing you money.

If you’re not sure where to start, or if any of this has raised more questions than it’s answered, that’s what we’re here for. Get in touch with the team at No Worries and we’ll help you make the most of the time you’ve got left before 5 April.

Five weeks. Let’s make them count 😊