For the tax year 2024/25, you are usually allowed to earn £12,570 before becoming liable to Income Tax. If you earn between £12,570 and £50,270, you’ll be classed as a basic-rate taxpayer and be liable to a 20% tax charge.

If you earn between £50,270 and £150,000 you’ll be classed as a 40% higher-rate taxpayer, and if you earn more than £150,000 you’ll be an additional-rate taxpayer and liable to 45%. Those who earn more than £100,000 could lose some or all of their Personal Allowance, and if you’re one of them, the amount of Income Tax you pay could effectively be significantly higher than 45%.

As Independent Financial advisers experienced in maximising tax efficiency, we could help you understand how you may be able to reduce your exposure to Income Tax. This could include:

Some employers allow you to exchange part of your salary for a non-cash benefit, such as increased pension contributions or travel passes. As this effectively reduces the amount you earn, you may drop down into a lower tax band, thus reducing the level of Income Tax you’re exposed to. If you are a high earner, this may help you to recover some, or all, of the Personal Allowance that you’ve lost.

All growth and income within ISAs is tax free. This means any income you take form an ISA when needed is free from Income Tax. Investing your money into a Stocks & Shares ISA means you can benefit from tax free growth and withdraw an income from it later on, without exposure to the tax.

Governments can and do regularly change the rules on tax efficient vehicles like ISAs. An ISA is not a risk free product and the value of your ISA investment may be at risk due to the investments held within the wrapper. The market price from fixed income investments can fall below the face value during the life of the investment and the money you invest may be at risk if the issuer defaults. ISAs can grow but depending on market conditions you may not realise the initial sum invested. There is no guarantee that you will get more out of an ISA investment than you have paid in. If you leave the UK and are no longer a UK resident then you can keep the ISA investment but you can’t make any new contributions to the ISA. ISA investments are liable to Inheritance Tax on death. Income Tax deducted at source on foreign dividends may be recoverable, but the tax credits attaching to UK dividends are not. There are no further income taxes to be paid on investments held within an ISA.

When you pay into a pension, the government normally provides tax relief on the money you contribute. As a result, every £100 placed into your pension typically costs you £80 if you’re a basic-rate taxpayer, or £60 if you’re a higher rate taxpayer. If you are an additional rate taxpayer, you may only pay £55. Pension contributions can be one of the most tax efficient ways to manage your income tax exposure whether employed or a company owner/director.

Investments that support fledgling companies often provide generous tax benefits, which may include Income Tax rebates up to certain amounts. This means investing in them may help to reduce your net exposure to Income Tax. If this is something you are considering, care should be taken as they are considered high risk. We are happy to assess whether such an investment might be right for you, and the potential risks involved with doing so.

Please remember that these figures are subject to certain allowances and stipulations, and it is important to assess and take into account your individual circumstances. If you are interested in understanding how you could make your earnings more tax-efficient, we would be happy to help.

If you’re a basic-rate taxpayer, in 2023/24 the tax will be charged at 8.75%, and if you’re a higher-rate taxpayer, you will be liable to 33.75%. As an additional-rate taxpayer you will be liable to 39.35%.

Restructuring your investments could help you to reduce your exposure to the tax. This might include investing in a Stocks and Shares ISA, as these are not liable to Dividend Tax when you withdraw money from them.

In 2023/24, you are allowed to earn up to £6,000 in profit on certain assets before Capital Gains Tax (CGT) is charged. From April 2024 it drops to £3,000, meaning you may be more liable to CGT. In 2023/24, CGT is typically charged at between 10 % and 28% depending on the type of asset you have sold, and your marginal rate of tax.

We are here to help you identify ways that you may be able to reduce your exposure to the tax, which may include carrying forward losses from previous years. Alternatively, you may want to consider increasing your pension contributions or investing in a Stocks and Shares ISA, as pensions and ISAs are not liable to CGT.

In 2022 the government “froze” the amount you’re allowed to have in your estate on death before Inheritance Tax (IHT) is charged. The amount, which is known as your nil-rate band, will remain at between £325,000 and £500,000 per individual depending on your circumstances.

If your assets continue to increase in value while the nil-rate band remains static, your estate may become liable to a greater IHT liability. When you consider the tax is normally charged at 40%, it may result in less of your wealth being passed to your loved ones.

There are ways to negate the effects of IHT and our Independent Financial Advisers can help you assess and potentially reduce your tax burden, which in turn could help you to boost the value of your wealth and leave more money to your loved ones when the time comes.