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5 ways to reduce your tax bill

With income tax receipts expected to reach record highs for the 2019/20 tax year, we offer some top tips to help bring your tax bill down.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

All eyes are on the potential tax rises next year. But the government doesn’t have to hike taxes in order to take more cash from our pockets.

In the 2019/20 tax year, the higher rate tax threshold was raised and it’s been estimated the total amount of income tax we have paid has increased to an incredible £193.2 billion.

And while most people want to pay their fair share of tax, nobody needs to pay over the odds. We look at five simple steps that could help bring your tax bill down.

Remember tax rules can change and their benefits will depend on your individual circumstances. Our financial advisers can give you information on how to make use of your tax allowances through financial planning but are not tax advisers. If you need complex tax calculations, we recommend speaking with an accountant.

This article and guides aren’t personal advice. If you are unsure whether an investment or course of action is right for you seek advice. All investments and any income they produce can fall as well as rise in value, so you could get back less than you put in.

5 tips to help pay less tax

1 – Consider using your ISA allowances

ISAs are one of the most tax-efficient ways to save and invest.

You can put up to £20,000 this tax year into an ISA. If your investments grow, you won’t have to pay capital gains tax. And if you’re investing for income, you won’t pay UK income tax either.

More about ISAs, the benefits and risks

2 – Consider making pension contributions

Investing in a pension for retirement is another way to efficiently save tax. Just like ISAs, there’s no UK income tax or capital gains tax on investments held in a pension.

If you're a UK resident, under 75 and not drawing from your pension, you can contribute as much as you earn (up to £40,000) to pensions each tax year and receive tax relief.

Remember, money in a pension cannot normally be accessed until age 55 (57 from 2028).

Annual allowance factsheet – what you need to know

More about pensions, the benefits and risks

3 – Use any unused allowance from previous years

If you have any unused pension annual allowance from the past three tax years, you might be able to use it this year – effectively increasing this years’ allowance. Any personal contributions are still limited by your earnings.

Find out more about pension carry forward

4 – Pay into a pension for your partner

Investing in a pension for a non-earning partner is one of the more generous pension give-aways. Non-earners under 75 that are UK resident can make a pension contribution of up to £2,880 and the government will add up to £720 in basic rate tax relief.

From age 55 (57 in 2028), up to 25% of the value of the pension fund can normally be taken as tax-free cash, with the balance being taxable as income.

However, if further withdrawals fall within the individual’s personal allowance each year, these will also be tax free.

5 – Transfer investments to your spouse or civil partner

If your spouse pays less tax than you, or no tax at all, then they could be losing out on valuable allowances each year. This includes the personal allowance, personal savings allowance, dividend allowance and capital gains tax allowance. You can gift investments to your spouse free of capital gains tax.

Looking for more help?

If you’d like an expert on financial planning to help you reach your goals you’re in the right place. Our financial advisers are dedicated to helping clients achieve peace of mind from having a sound financial plan in place.

It starts with a quick call with our advisory helpdesk. They’ll want to hear about your financial goals and and we will help you decide if advice is suitable for you.

If it looks like taking advice is right for you, we’ll book your free initial consultation with one of our financial advisers. They’ll discuss your options with no pressure to take advice.

Book a call with our helpdesk by 12 February 2021, and agree to take advice by 26 March 2021 to receive investment advice over the phone for a fixed, low cost of £495+VAT, where applicable. Terms apply.

To get started right now, give our advisory helpdesk a call on 0117 317 1690 or book in a call at a time to suit you.

Book a call back

Advisory Service Fixed Charge Offer Terms and Conditions

1. If you contact our Advisory Helpdesk between 18 December 2020 and the close of business on 12 February 2021, agree to receive Investment Advice by telephone and return a signed Adviser Charge Agreement by close of business 26 March 2021, we will only charge you our minimum charge of £495 (+VAT where applicable) (the “Offer”). The Offer is subject to these terms and conditions.

Details of the Offer

2. To be eligible you must contact our Advisory Helpdesk between 18 December 2020 and the close of business on 12 February 2021 either by calling 0117 317 1690 or by booking a call back with us by close of business on 12 February 2021. You must also decide that you wish to receive Investment Advice from us, and have signed and returned an Adviser Charge Agreement, by close of business on 26 March 2021.

3. If you decide that you wish to receive Investment Advice by telephone from us within the timescales noted above, you will not be subject to our standard rate of 1-2% of the portfolio value being advised upon with a minimum charge of £495 when advice provided by telephone. Instead we will fix the cost of receiving the advice from us at our minimum charge of £495 (+VAT where applicable). For more information regarding our financial advice charges, please visit our website at www.hl.co.uk/financial-advice/advisory-charges.

4. Investment Advice means the receipt of recommendations from one of our financial advisers in relation to investment decisions. This may include:

i. A new cash investment into any panelled wrapper. This would include reinvestment of tax free cash taken from a pension or making a pension contribution.

ii. Any investment through regular premiums.

iii. Recommendations to alter an existing investment portfolio except where the existing investment is currently held within an Investment Bond, Income Drawdown or Pension arrangement

5. Investment Advice does not include wider financial planning matters which shall include, but are not limited to, advice on transferring or consolidating pensions, retirement planning, care provision and inheritance tax planning. If after discussions with your financial adviser, the scope of advice needs to be widened to include wider financial planning matters, the Offer will no longer be applicable.

6. This Offer only covers Investment Advice received by telephone and excludes advice provided on a face to face basis.

7. This Offer excludes on-going advice charges.

8. Where you qualify for the Offer, your Financial Adviser will apply the fixed charge to your Adviser Charge Agreement.

Please note:

9. The Offer is limited to one per client.

10. You must not be an employee of any Hargreaves Lansdown Group company or a member of any such employee’s immediate family or household.

11. We may amend, extend or withdraw this Offer at any time. Details of any such amendment, extension or withdrawal will be posted on our website at www.hl.co.uk/financial-advice.

12. This Offer will be governed by English law and, in participating, you submit to the jurisdiction of the English courts.

13. References in these terms and conditions to “Hargreaves Lansdown”, “our”, “us” or “we” are to Hargreaves Lansdown Advisory Services Limited (company number 03509545), authorised and regulated by the Financial Conduct Authority (FCA Register number 189627), whose registered office is at 1 College Square South, Anchor Road, Bristol, BS1 5HL. References to the “Hargreaves Lansdown Group” are to Hargreaves Lansdown plc (company number 02122142) and its subsidiaries from time to time.

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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