Reviewing your borrowing at least once a year can help you understand the total cost of any loans you hold and whether your current arrangements still suit your circumstances. This article covers what the UK tax year reset means for borrowers, how base rates feed into loan pricing, and when it may be worth comparing your options.
What changes at the tax year end?
A few financial limits reset on 6 April each year. The most widely known is the ISA allowance, which resets to £20,000 for most adults. Any unused allowance from the current tax year cannot be carried forward. You can check the current ISA rules and limits on the MoneyHelper ISA page.
Other limits that reset include:
- Capital gains tax annual exemption: the amount of gain you can make before tax applies resets each April.
- Pension contribution limits: the annual allowance for pension contributions refreshes on 6 April.
- Personal savings allowance: the amount of savings interest you can earn tax-free also runs per tax year.
These resets do not directly change the terms of any loan you hold. But they can affect how much cash you have available and, in turn, how affordable a new loan might be. For borrowers in particular, the reset is a useful prompt to weigh up whether spare savings could reduce a debt balance, or whether borrowing remains the better option given current rates.
Why this can matter for borrowers
The tax year turning is a useful prompt to look at the total cost of any borrowing you have, not just the monthly payment.
For example, a loan of £5,000 at a representative APR of 9.9% over three years produces a monthly payment of approximately £160.83. Multiplied across 36 payments, the total amount repayable is £5,789.88, rounded here to £5,790. That extra £790 is the real cost of borrowing that sum. (Calculation based on a standard reducing-balance formula; you can verify using the MoneyHelper loan calculator.)
As a second illustration, if a borrower on the same £5,000 loan at 9.9% APR overpaid by £50 each month on top of the standard £160.83 payment, the loan would be repaid in approximately 28 months rather than 36, and the total interest paid would fall from around £790 to approximately £610, a saving of roughly £180. The exact figure depends on when overpayments are applied and whether an early repayment charge applies, so it is worth checking your loan agreement before making extra payments.
The important point is to look at the total amount repayable, not just the monthly figure. Under FCA CONC 3 consumer credit disclosure rules, lenders are required to show both figures in their financial promotions, but the monthly payment tends to be the number that stands out.
The Bank of England's base rate also feeds into the interest rates lenders offer. The base rate is currently 4.25% (correct as of May 2025); you can check for any subsequent changes on the Bank of England base rate page. Comparing that to the rate on your existing loan can help you decide whether refinancing is worth exploring. If you are thinking about refinancing, it can help to use a soft-search eligibility checker before applying, as these tools give an indication of whether you are likely to be accepted without leaving a mark on your credit file that other lenders can see.
Who may want to review their position
- People with a personal loan taken out two or more years ago, when rates may have been different. A useful first step is to note the APR on your original agreement and compare it against current representative rates from a comparison site.
- Anyone thinking about new borrowing, who wants to factor in affordability alongside any allowance changes. It can help to use the MoneyHelper loan calculator to see the total repayable before applying.
- Borrowers who have received a bonus or salary increase and want to check whether overpaying is an option. Check your loan agreement for the early repayment charge clause, which lenders must disclose under FCA rules, before making any extra payment.
- Anyone who set up a debt management plan or arrangement and wants to check whether the annual review date falls around this time. A useful first step is to contact your DMP provider to confirm the review schedule and whether any creditor terms have changed. Free, impartial debt advice is available from StepChange and National Debtline if you are unsure about your options.
What to read next
For a full explanation of how personal loan interest works and how to compare the total cost of borrowing, the following guides can help:
Sources
- MoneyHelper, ISA allowances and savings rules.
- FCA, CONC 3: Financial promotions and communications with customers, consumer credit disclosure requirements including total amount repayable and representative APR.
- Bank of England, Bank Rate data, base rate information used by lenders when setting personal loan rates.
- StepChange, Free debt advice.
- National Debtline, Free debt advice.