Tax Tips

Here are five top UK personal tax planning tips to help individuals optimize their tax affairs:

1. Maximize Your ISA Allowance

  • ISAs (Individual Savings Accounts) allow you to save or invest up to £20,000 per tax year without paying any income or capital gains tax on the returns. There are different types of ISAs, such as Cash ISAs, Stocks and Shares ISAs, and Lifetime ISAs (LISAs). It's a tax-efficient way to grow your wealth, so ensure you're taking full advantage of the allowance.

2. Contribute to a Pension

  • Contributions to pensions receive tax relief. For every £80 you contribute, the government tops it up with an extra £20 if you’re a basic-rate taxpayer (20%). Higher-rate (40%) and additional-rate (45%) taxpayers can claim further tax relief on their Self-Assessment tax returns. The annual allowance for pension contributions is currently £60,000, but this can be lower if your income exceeds certain thresholds.

3. Use Your Personal Allowance Efficiently

  • Each individual has a personal allowance, which is the amount of income you can earn each year before paying tax. For the 2024/25 tax year, this is £12,570. If you’re married or in a civil partnership and one of you earns less than the personal allowance, you can transfer up to 10% of the personal allowance (through the Marriage Allowance) to the higher earner, saving up to £252 in tax.

4. Take Advantage of Capital Gains Tax Allowance

  • Capital Gains Tax (CGT) is charged on the profit you make from selling assets such as shares or property. The CGT allowance for the 2024/25 tax year is £3,000, meaning you can make gains up to this amount without paying tax. Consider selling assets over multiple tax years to make the most of this annual exemption. Also, gifting assets to a spouse can help you both make use of your allowances.

5. Utilize Inheritance Tax (IHT) Reliefs

  • Inheritance Tax is charged at 40% on estates above £325,000 (the nil-rate band). However, there are several ways to reduce this liability. One of the simplest ways is to use the £3,000 annual gifting exemption. You can also make gifts of up to £250 to as many people as you want each year. Another method is to pass on your estate to your spouse or civil partner, which is generally tax-free.

These tax tips can help ensure that you make the most of available allowances and reliefs to reduce your tax liabilities in the UK. Always consider consulting a tax advisor for personal and up-to-date advice.