What happens if you don’t use your allowances?

Life’s busy, and in the moment it’s easy to let things slip.

The problem with tax allowances is that many follow a ‘use it or lose it’ rule - meaning you usually can’t carry them over into the next tax year (which begins on 6 April).

So, what happens if you don’t use them?

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1. Personal Allowance

What is it?

This is the amount of income you can earn before paying Income Tax. It’s currently £12,570 per year.

What happens if you don’t use it?

If you earn less than £12,570 in a tax year, the unused amount doesn’t roll forward. It resets at the start of the next tax year.

2. ISA Allowance

What is it?

This is the total amount you can save or invest tax efficiently into one or multiple ISAs each tax year. The current limit is £20,000. Learn more about ISA allowances.

What happens if you don’t use it?

If you don’t contribute the full allowance by the end of the tax year, the unused portion is lost. You can’t carry it forward.

Don’t let indecision stop you from making the most of this valuable allowance. You don’t have to invest your allowance straight away; you can always hold your money as cash if that suits you.

3. Pension Annual Allowance

What is it?

The maximum you can contribute to pensions each tax year while still receiving tax relief. Tax relief means the government adds money to your pension based on the tax you’ve paid.

For most people, the Annual Allowance is £60,000 or 100% of your earnings - whichever is lower. But it can vary depending on whether you’re a high earner, have no or very low earnings, or if you’ve already taken taxable money from your pension pot. Learn more about pension allowances.

What happens if you don’t use it?

Pensions are the main exception to ‘use it or lose it’.

You can usually carry forward unused pension allowance from the previous three tax years, provided you were a member of a pension scheme in those years, and you’ve used the current year’s allowance first.

4. Capital Gains Tax (CGT) allowance

What is it?

The total profit you can make from selling assets (usually excluding your main home) before paying Capital Gains Tax. For the current tax year, the allowance is £3,000 for individuals and personal representatives, and £1,500 for most trustees.

What happens if you don’t use it?

If you don’t realise gains in the tax year, you lose that year’s exemption. It can’t be carried forward.

5. Dividend allowance

What is it?

This is the amount of dividend income you can receive without paying tax. The current dividend allowance is £500.

What happens if you don’t use it?

If you don’t receive dividends in that tax year, the allowance is lost. It doesn’t roll forward.

6. Gift allowances

What is it?

Inheritance Tax may apply to your estate when you die. But there are several gifting allowances that let you pass money on during your lifetime without it counting towards the value of your estate for IHT purposes.

For the 2025/26 UK tax year, you can gift up to £3,000 tax-free each year. This is known as the annual exemption and is another allowance you can carry forward if you haven’t used it. Alongside this, additional allowances include up to £250 per person for small gifts, wedding gifts up to £5,000 for children, and regular, tax-exempt gifts from surplus income (provided they meet certain conditions).

Read more about Gifts and Inheritance Tax.

What happens if you don’t use it?

Most gifting allowances reset each tax year.

But the annual exemption can be carried forward for one tax year. So, if you didn’t use last year’s £3,000, you can gift £6,000 this year - but you must use last year’s allowance before this year’s.

7. Junior account allowances

What is it?

The total current allowance you can save into a Junior ISA is £9,000. You can split this between a cash ISA and a stocks and shares ISA as long as you don’t exceed the overall allowance.

For a Junior SIPP, you can contribute up to £2,880 each tax year with tax relief increasing the total contribution to £3,600.

What happens if you don’t use it?

For Junior ISAs, any unused allowance is lost at the end of the tax year. And the same applies to a Junior SIPP as carry forward rules don’t apply to Junior SIPPs.

Why using your allowances matters

Used properly, maximising tax-efficient allowances can make more of your money work for you. Over time, that can make a meaningful difference to what you build up. Tax rules can change, and future returns aren’t guaranteed, but making steady use of allowances can improve your long-term position.

Failing to use your allowances can mean missing out on tax-efficient growth and potentially paying more tax than necessary over time.

Remember, you don’t need to use every single allowance or do everything at once. Even partially using an allowance can make a difference and create meaningful long-term results.

• Read: Your 2025/2026 tax allowances: the basics
• Read: Your tax year end checklist
• Read: See what a difference maxing out your allowances could make

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Please be aware that past performance is not a reliable indicator of future returns. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.