Chartered Financial Adviser's top 5 tax saving tips

No one knows what tax changes might be announced in the future. But whatever happens, we believe you should try taking advantage of the tax allowances in the current tax year where you can.

Here are our top five tax tips to think about taking advantage of now.

This article isn’t personal advice. Remember tax rules can change and their benefits will depend on your individual circumstances. We can advise you on how to make use of your tax allowances through financial planning, but if you need complex tax calculations we recommend consulting an accountant.

All investments can go up as well as down in value, so you could get back less than you put in.

Tip 1 – make use of your ISA allowances

There’s no UK income tax or capital gains tax on assets held in an ISA, making them one of the most tax-efficient ways to save. You can invest up to £20,000 into ISAs this tax year – that’s £40,000 per couple.

Tip 2 – make pension contributions

Investing in a pension for retirement is one of the most tax efficient ways to save. The general rule is you can contribute as much as you earn to pensions this tax year and receive tax relief, although there is an annual allowance of £40,000. This is as long as you're a UK resident, under 75 and not drawing your pension.

Those with “adjusted income” of £240,000 or more could see a lower, tapered annual allowance. Broadly speaking, adjusted income is your total taxable income (including salary, dividends, rental income and savings interest) plus the value of any employer pension contributions.

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

Tip 3 – use any available carry forward

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

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

Tip 5 – transfer assets to your spouse or civil partner

If your spouse pays less tax than you, or no tax at all, then you could be losing out on valuable allowances each year. This includes the personal allowance, savings allowance, dividend allowance and capital gains tax allowances that aren’t being used. You can transfer assets to a spouse free of capital gains tax.

For all our tax saving tips, see our free guide to saving 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. My colleagues and I 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. If it looks like taking advice is right for you, we’ll book your free initial consultation with me or one of our other financial advisers. We’ll discuss your options with no pressure to take advice and no charge. If, having heard what advice can offer, you decide to go ahead there will be a charge (usually 1-2% of the portfolio value subject to a minimum of £495 + VAT).

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