As we approach the end of the tax year, now is the perfect time to review your tax affairs. This is a great opportunity to ensure you have taken advantage of all the reliefs available to you to help reduce your tax bill.

Some of these opportunities are extra effective for higher earners, such as those with income exceeding key tax thresholds such as £50,270 and £100,000. However, they are worth considering whatever your income level.

1.    Pensions

Contributing to a pension is one of the most tax-efficient ways to save for retirement. The government provides tax relief on contributions, topping up personal contributions and giving tax relief.

It is usually very beneficial from a tax perspective to contribute up to the £60,000 contribution allowance each year. However, this full allowance may be restricted for high earners earning in excess of £200,000 a year, or for those who are looking to contribute more than they earn. If you have not used your full allowance in the past three tax years, you may be able to carry forward any unused allowances, allowing you to make a larger contribution.

2.    Charitable Donations

Making Gift Aid donations to registered UK charities can reduce your tax bill while supporting a good cause.When you donate under Gift Aid the charity is able to claim an extra 25% from the government.

You receive tax relief by extending the amount of income that is taxed at the lower 20% rate of tax, and increasing the higher rate limit by the amount of the grossed-up donation. This means that more of your income is taxed at lower rates.

3.    ISAs

Individual Savings Accounts (ISAs) offer a simple and effective way to save and invest tax-free. Any interest,dividends, or capital gains earned within an ISA are exempt from tax.

The maximum amount you can save in a tax year is £20,000, and you must make the investment by 5 April for it to count for that tax year. If you don’t use the allowance for the year,then it is lost.

There are many types you of ISAs you can consider investing in, such as cash or stocks and shares. Financialadvice is essential to ensure that understand the full risks and terms of ISA’s.

4.    Capital Gains

Capital Gains Tax (CGT) may arise on the disposal of certaincapital assets, such as land, shares or crypto assets. Each taxpayer gets a tax-free annual allowance of £3,000. If you do not use this allowance within atax year, it cannot be carried forward. Any capital gains not offset by your allowance or losses will be taxed at up to 24%.

If you are considering selling shares or crystallising gains on your crypto assets, consider timing your disposals to take full advantage of your £3,000 allowance before itis lost. You can also sell assets that are sitting at a loss, to offset gains you have made in the year.

5.    Enterprise Investment Schemes and Seed EIS Shares

Investing in shares qualifying for the Enterprise Investment Scheme (EIS) or Seed EIS (SEIS) also offers significant tax incentives. Investing in these schemes can give you an income tax credit of up to 50%, as well as the option of deferring capital gains.

Relief can be carried back to the previous year. So, investing in the 2024/25 tax year could reduce your 2023/24 or 2024/25 tax bill, potentially resulting in a tax refund.

EIS and SEIS investments are very high risk and financial advice is essential to ensure that understand the full risks and terms of investment.

Get in touch with us

For further information and advice on any of the topics covered, or if you need help preparing and filing your self-assessment return, please get in touch with our team, who will be more than happy to assist you.

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