Five tax tips chosen by the experts

A change of government always brings some insecurity on taxation - will the incoming administration take the opportunity to shore up the country’s dire finances with a few selective tax rises? While tax planning can be complicated, there are a number of smart, practical steps you can take to mitigate tax even if an incoming government starts to tinker with the system.

We asked two experts to weigh in with their savvy suggestions for the 2024-25 tax year, so you can make sure you're not paying any more tax than you need to.

1. Higher earners can use their pension to beat the 60% tax trap

Barney Sears, Financial Planner at BRI Wealth Management, says taking steps to mitigate the 60% effective rate of Income Tax for those earning over £100,000 per year can be a big win:

“Once earnings exceed £100,000 you will begin to lose your personal allowance of £12,570. Earnings over and above £100,000 per year reduce your personal allowance at a rate of £1 for every £2 earned and you lose your personal allowance entitlement entirely once you're earning £125,140. This tapering of the personal allowance, combined with the standard 40% tax rate, means you are effectively being taxed at a rate of 60%.”

He says one of the simplest and easiest ways of beating this trap is via personal pension contributions. Pension contributions reduce net income and can bring you back below the critical threshold. Sears adds: “A good way to do this would be to reduce your income via salary sacrifice, allowing you to save a modest sum of national insurance as well.” Most companies will facilitate this.

Not only do you avoid paying a 60% rate of tax and retain your personal allowance, says Sears, you will also be building your future retirement pot, “and whatever you invest will be able to grow tax-free and benefit from the 25% tax-free allowance (up to a maximum of £268,275).”

2. Transfer your tax allowances with your spouse or civil partner