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General Tips For Individuals
These are among the best UK tax-saving strategies to consider. 1. Max out your ISA • Allowance: £20,000 per year • All income and gains inside The ISA are completely tax-free Why it matters more now: • Dividend allowance is only £500 • CGT allowance is very low (£3,000) Best tactics: • Use Stocks & Shares ISA for long-term investing • Consider moving taxable investments into ISA gradually • Use both your and your partner’s ISA allowance (double to £40k) 2. Pension contributions (biggest tax relief available) • Up to £60,000/year (or earnings) with tax relief Why it’s useful: • 20% / 40% / 45% income tax relief • Reduces your taxable income High-impact uses: • Avoid the £100k to £125k tax trap (effective 60% tax band) • Salary sacrifice can save National Insurance too • Use carry forward (last 3 years unused allowance) 3. Use your personal allowance efficiently • £12,570 tax-free income Key planning ideas: • Shift assets to a lower-earning spouse • Use dividends and salary mix, if you run a company 4. Don’t waste your small allowances as they add up Dividend allowance • £500 is tax-free Savings allowance • £1,000 (basic rate) / £500 (higher rate) Capital Gains Tax allowance • £3,000 (very low now) Strategy: • Harvest gains each year (sell & rebuy assets to use CGT allowance) • Keep income-generating assets inside ISAs/pensions 5. Use spouse allowances (hugely underused) You effectively get double allowances: • 2 × ISA = £40,000 • 2 × CGT allowance • 2 × dividend allowance • Marriage Allowance lets you transfer £1,260 of allowance if one partner earns less. 6. Inheritance tax (IHT) planning early can result in significant savings • Annual gifting allowance: £3,000/year • Regular gifts out of surplus income
• Pension contributions • Electric cars / cycle schemes • Saves income tax and National Insurance 8. Plan around frozen thresholds Many allowances are frozen, meaning inflation pushes you into higher tax bands Practical tactics: • Keep income just below £50k or £100k thresholds • Use pensions/charitable donations to reduce taxable income 9. Use timing strategies • Realise gains before 5 April • Split income across tax years • Delay bonuses/dividends if beneficial 10. Common mistakes to avoid • Leaving ISA allowance unused (“use it or lose it”) • Holding investments outside wrappers unnecessarily • Ignoring spouse planning • Not claiming pension higher-rate relief If you only focus on a few things, prioritise: 1. ISA (£20k) 2. Pension contributions (especially >£50k or £100k income) 3. Spouse planning 4. CGT and dividend sheltering via wrappers. |
Capital Gains Tax Tips
As capital gains tax is payable at the individuals highest marginal rate of tax, choosing when to crystallise a capital gain or loss could result in a significant tax saving. Capital losses and annual exemptions can be made use of by 'bed and breakfast' transactions. This would involve for example, the sale of shares following by their subsequent re-purchase on a later date. Business Asset Disposal Relief (BADR) may be available and should be claimed where appropriate. Capital gains tax gift relief may be available on assets such as business property, and has the effect of holding over any gain until the recipient of the gift has disposed of it. Hold over relief may be available where shares are received in exchange for a business carried on by a partnership or sole trader. Gifts to charities could attract exemption from capital gains tax. Going to live abroad prior to a disposal crystallising a large capital gain could avoid the resulting capital gains tax that may arise. Inheritance Tax Tips
Taking out an appropriate life assurance plan may be advisable to cover a potential inheritance tax liability arising on death. Settlements are very useful for inheritance tax planning and in particular where the beneficiary is not able to manage the funds themselves. Draw up your Will carefully and keep it under constant review as this could reduce the inheritance tax that may arise. Leaving assets to persons other than the surviving spouse could maximise the nil rate band. National Insurance Tips
It is advisable to have an adequate contribution record to preserve your entitlement to contributory social security benefits. If necessary, consider paying top-up voluntary class 3 national insurance contributions. Where a Director receives remuneration from a number of companies within a group, it may be advisable to arrange to pay him from one company, which would then invoice the others for a management charge. |
