Use your personal allowance
The personal allowance is the amount of income you can earn each tax year without paying any income tax. For the tax year 2024/25, the personal allowance is £12,570.
Use your ISA allowance
An ISA is a tax-efficient savings vehicle that allows you to save up to £20,000 each tax year without paying any tax on the interest or investment gains you earn. Make sure you are using your full ISA allowance each tax year to maximise your tax-free savings.
Use your pension allowance
Contributing to a pension can be a tax-efficient way to save for retirement. You can contribute up to 100% of your annual earnings, up to a maximum of £60,000 each tax year (or the value of your unused annual allowance from the previous three tax years). If you are a high earner, you may be subject to the tapered annual allowance, which reduces the amount you can contribute to your pension each year.
Use your Capital Gains Tax allowance
If you sell assets such as shares, property or other investments and make a profit, you may be liable to pay Capital Gains Tax (CGT) on the gain. However, you can use your CGT allowance to reduce your tax liability. For the tax year 2024/25, the CGT allowance is £6,000.
Use your Inheritance Tax allowance
If you are planning to pass on your assets to your loved ones, it's important to consider the potential impact of Inheritance Tax. You can use your IHT allowances to reduce your IHT liability. For example, you can make gifts of up to £3,000 each tax year without incurring any IHT, and you can carry forward any unused portion of this allowance to the next tax year.
Claim tax relief on charitable donations
If you make donations to charity, you may be eligible for tax relief on your donations. For example, if you are a basic rate taxpayer, you can claim back the basic rate tax on your donations through Gift Aid. Higher rate taxpayers can also claim back the additional tax relief on their donations through their self-assessment tax return.
Maximising your tax allowances can be complex, and it's important to seek professional advice to ensure that you are making the most of all the available tax reliefs and allowances. A qualified financial planner can help you to understand your tax liabilities and develop a tax-efficient strategy to help you maximise your wealth.
