As the end of the current tax year draws near, we are about to enter the third year of the six-year freeze on income tax thresholds, a move that has significantly altered the fiscal landscape. The proportion of adults paying higher rates of income tax has risen from 3.5% in 1991-92 to an expected 14% by the 2027–28 fiscal year, according to the Institute for Fiscal Studies.

For those recently finding themselves in the higher tax bracket, as well as for those who have been navigating this territory for some time, here are four key strategies to help manage your finances more effectively and reduce tax liabilities:

1. Maximise pension contributions: Contributing to your pension not only prepares you for a secure future, but also offers immediate tax benefits. For higher-rate taxpayers, there is £40 in government tax relief available for every £100 contributed. It’s important to remember that while pension withdrawals are taxable, up to 25% can be taken as a tax-free lump sum, offering a strategic advantage in tax planning and potentially placing you in a lower tax bracket upon retirement.

2. Utilise pension contributions to preserve Child Benefit: For earners exceeding £50,000, the High Income Child Benefit Charge applies, progressively reducing Child Benefit. By making pension contributions, you can lower your taxable income, potentially mitigating or completely avoiding this charge, thus preserving your Child Benefit.

3. Invest in tax-efficient savings: With forthcoming reductions in capital gains and dividend allowances, ISAs and pensions become even more attractive as tax shelters. These vehicles allow you to fully utilise your annual allowances and protect your gains from tax liabilities.

4. Leverage spousal allowances: Married couples enjoy the benefit of double the allowances for ISAs, capital gains, personal savings, and dividends. Transferring assets between spouses can maximise the use of these combined allowances, offering potential tax savings and enhancing your financial strategy.

Beyond these strategies, keeping abreast of changes in tax regulations is crucial. The tax environment is constantly evolving, highlighting the need for dynamic financial planning and expert consultation.

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Whether you’re an existing client or new to our services, we’re equipped to support your tax year-end planning and set you up for the year ahead. Why not arrange a meeting with one of our advisers, providing an opportunity to see how our bespoke advice can meet your financial needs. Book your session today to begin shaping your financial future.

Important: When investing your capital is at risk. The value of pensions and investments may fall as well as rise. Tax treatment varies according to individual circumstances and is subject to change. Tax advice is not regulated by the FCA.