If you’ve just had a lump sum land in your bank account after selling some shares, you’re not alone in wondering “What should I do with it?”
For many people, the instinct is simple:
- Pay a chunk off the mortgage
- Put a bit into an ISA
- Treat yourself - you’ve earned it
And there’s nothing wrong with any of that.
But if your windfall is on the larger side, there are some bigger questions worth thinking about… because the decisions you make in the next few months could meaningfully affect how much tax you pay and how much of that windfall you actually keep.
First: Remember CGT has almost no cushion now
The Capital Gains Tax allowance is now just £3,000 for individuals in 2025/26 — a fraction of what it used to be.
On top of that, most gains on shares are taxed at 18% (basic rate) or 24% (higher rate) depending on where your income sits in the tax bands.
This means:
If you’ve received a sizeable payout, a significant slice of it may be heading straight to HMRC unless you think proactively.
Yes, an ISA contribution may be a good idea… but it won’t reduce this year’s tax
An ISA is still a brilliant home for future growth, especially given the £20,000 annual allowance for 2025/26 and 2026/27 – before reducing toe £12,000 for under 65s.
But it doesn’t reduce the tax bill on the gain you’ve already made.
It’s future-proofing - not this-year saving.
That’s why people with larger windfalls often benefit from thinking beyond the obvious.
One of the biggest “aha!” moments for people: pensions can reduce your overall tax bill in a windfall year
This is the part that most people don’t realise.
A pension contribution doesn’t cancel out your capital gain directly.
But it can:
- reduce how much of your income sits in the higher-rate band
- which in turn reduces how much of your gain is taxed at the higher CGT rate
- and it gives you tax relief at your marginal rate — 20% automatically, plus additional relief for higher-rate taxpayers via Self Assessment.
It’s one of the few tools available that can deliver two simultaneous tax benefits in a heavy CGT year, which is why higher-earning clients often find it valuable.
This doesn’t mean you should make a pension contribution.
It simply means: it may be worth understanding how it affects your numbers before the tax year closes.
And yes - for some people, VCTs or EIS/SEIS can also play a role
These are high-risk, specialist investments. Not for everyone.
Not for most people, in fact.
But they do exist for a reason:
- EIS can offer income tax relief of 30% and allow gains from other assets to be deferred if reinvested.
- SEIS offers even higher upfront relief (50%) on smaller contributions
- VCTs currently offer 30% income tax relief (reducing to 20% from April 2026).
These come with long lock-ups, higher risks, and complex rules.
But for some higher-earning individuals with significant windfalls, they are options worth exploring with an adviser, not ignoring entirely.
The key question isn’t “What should I do?” - it’s “What should I think about?”
As ever, any financial decision should be viewed in the context of your wider life goals and financial journey. What is right for you might not be right for the next person.
This is where advice genuinely adds value
Anyone can open an ISA.
Anyone can make a pension contribution.
Anyone can Google “best VCT offers”.
But the real benefit comes from understanding - which of these is relevant to your situation, how much headroom you actually have in your allowances, and whether the tax tail is wagging the financial dog.
If your windfall is material then it’s worth understanding the full range of options and how they work.
That’s exactly the kind of conversation we help clients navigate.
FCA-Compliant Note
This article provides general information only and does not constitute personal financial advice or a recommendation to act. Tax treatment depends on individual circumstances and may change. If you’re considering any of the ideas above, please speak to a regulated financial adviser.