Paying tax is inevitable, but paying more than necessary isn’t. With proper planning and the right strategies, UK taxpayers can significantly reduce their tax burden whilst staying fully compliant with HMRC regulations. Whether you’re a sole trader, company director, or employed individual, these expert tips will help you keep more of your hard-earned money.
1. Maximise Your Pension Contributions
One of the most effective ways to reduce your tax bill is through pension contributions. For the 2024/25 tax year, you can contribute up to £60,000 annually (or 100% of your earnings if lower) and receive tax relief at your marginal rate.
Key benefits:
- Basic rate taxpayers receive 20% tax relief automatically
- Higher rate taxpayers can claim additional 20% relief through self-assessment
- Additional rate taxpayers can claim 25% extra relief
Top tip: If you haven’t used your full allowance in previous years, you may be able to carry forward unused allowances from the last three tax years.
2. Utilise Your ISA Allowances
Individual Savings Accounts (ISAs) offer a tax-free wrapper for your investments and savings. For 2024/25, you can save up to £20,000 across different ISA types:
- Cash ISAs: Tax-free interest on savings
- Stocks & Shares ISAs: Tax-free dividends and capital gains
- Innovative Finance ISAs: Tax-free returns on peer-to-peer lending
- Lifetime ISAs: Additional 25% government bonus for under-40s saving for first homes or retirement
3. Claim All Available Allowances and Reliefs
Many taxpayers miss out on legitimate tax reliefs. Ensure you’re claiming:
- Personal Allowance: £12,570 for 2024/25
- Marriage Allowance: Transfer £1,260 of unused personal allowance to your spouse
- Dividend Allowance: £500 tax-free dividend income
- Capital Gains Tax Allowance: £6,000 for individuals
- Property Allowance: £1,000 tax-free rental income
- Trading Allowance: £1,000 tax-free self-employment income
4. Strategic Timing of Income and Expenses
For business owners and higher earners, timing can significantly impact your tax position:
Income timing:
- Defer bonuses or dividends to the next tax year if approaching higher rate thresholds
- Consider spreading income across tax years to stay within lower rate bands
Expense timing:
- Accelerate business expenses before year-end
- Purchase equipment through the Annual Investment Allowance (up to £1 million until March 2026)
5. Make the Most of Business Expenses
Self-employed individuals and company directors can claim legitimate business expenses:
- Home office costs: Simplified rate of £6 per week or actual costs
- Travel expenses: Business mileage at 45p per mile (first 10,000 miles)
- Professional development: Training courses and professional memberships
- Equipment and software: Computers, phones, and business software
- Marketing costs: Website development, advertising, and networking events
6. Consider Incorporation
Sole traders earning over £50,000 might benefit from incorporating as a limited company. Benefits include:
- Corporation tax rates (19-25%) often lower than personal tax rates
- Dividend tax advantages for extracted profits
- Greater expense claiming opportunities
- Improved pension contribution limits
However, incorporation isn’t suitable for everyone, so professional advice is essential.
7. Gift Aid and Charitable Donations
Charitable giving through Gift Aid extends your basic rate tax band, potentially saving higher rate taxpayers significant amounts:
- Charities claim 25% extra on your donation
- Higher rate taxpayers can claim additional relief through self-assessment
- Donations can be carried back to the previous tax year
8. Family Tax Planning
Consider your household’s overall tax position:
- Income shifting: Pay your spouse a salary from your business if they’re a lower rate taxpayer
- Junior ISAs: Save up to £9,000 annually for children tax-free
- Child Benefit: If earning over £50,000, consider pension contributions to reduce adjusted net income
- Education fees: Use grandparent gifts or trust structures for inheritance tax efficiency
9. Capital Gains Tax Planning
Optimise your investment disposals:
- Use your annual exemption (£6,000 for 2024/25)
- Realise losses to offset against gains
- Consider transferring assets to your spouse to utilise their allowance
- Time disposals across tax years to maximise exemptions
10. Property Tax Strategies
Property investors and landlords can:
- Claim mortgage interest as a tax credit (basic rate relief)
- Deduct legitimate property expenses (repairs, letting fees, insurance)
- Consider incorporating property investments for tax efficiency
- Utilise Rent-a-Room relief for lodgers (£7,500 exemption)
Plan Ahead: Key Dates to Remember
- 5th April: End of tax year – deadline for many tax planning strategies
- 31st January: Self-assessment and payment deadline
- 19th July: PAYE payment deadline for companies
The Importance of Professional Advice
Tax legislation is complex and constantly changing. What works for one person might not be suitable for another. Professional tax planning can often save far more than it costs, whilst ensuring you remain compliant with all regulations.
At Jermyn & Co, our qualified accountants and tax advisers work with individuals and businesses across Norfolk and Suffolk to develop tailored tax strategies. We stay up-to-date with the latest legislation changes and identify opportunities you might have missed.
Take Action Today
Don’t wait until the last minute to think about your tax position. The most effective tax planning happens throughout the year, not just before filing deadlines.
Ready to reduce your tax bill? Contact our expert team today for a free initial consultation. We’ll review your current situation and identify immediate opportunities to save tax whilst planning for the future.
This article provides general guidance only and shouldn’t be considered specific tax advice. Tax rules can change, and individual circumstances vary. Always consult with a qualified professional before making financial decisions.