Reduce liabilities, preserve wealth, and stay compliant with HMRC regulations in 2025.
Introduction: Why Tax Planning Matters More for High Earners
For high-income earners in the UK, effective tax planning is not optional — it’s essential for safeguarding wealth and reducing liabilities. As income grows, so does exposure to higher tax rates and the risk of losing allowances. The good news? The UK tax system offers legitimate strategies to optimise your position.
At Legacy Accounting, we help high earners legally minimise their tax bills while ensuring full compliance with HMRC. In this guide, we’ll explore the key strategies to structure your finances efficiently and plan ahead.
1. Maximise Pension Contributions
Reduce taxable income and secure long-term savings.
Contributing to a pension is one of the most tax-efficient ways to lower your income tax bill. For the 2024/25 tax year, the annual allowance is £60,000, although tapering may apply for those with very high incomes. You can also carry forward unused allowances from the previous three years.
Benefits include:
-
Immediate tax relief at your highest marginal rate.
-
Long-term, tax-efficient investment growth.
-
Potential to avoid slipping into the 45% additional rate.
2. Utilise ISAs for Tax-Free Growth
Shelter income and gains from tax.
The ISA allowance for 2024/25 remains £20,000 per individual. While contributions aren’t tax-deductible, all income and capital gains are tax-free.
Options include:
-
Cash ISA – Safe savings with tax-free interest.
-
Stocks & Shares ISA – Tax-free investment growth.
-
Innovative Finance ISA – Peer-to-peer lending returns without tax.
For couples, using both allowances means £40,000 invested tax-free each year.
3. Make Use of the Capital Gains Tax (CGT) Allowance
Manage and spread asset disposals.
The CGT allowance for 2024/25 is £6,000 per person. High earners can:
-
Sell assets gradually over tax years.
-
Transfer assets to a spouse or civil partner to double exemptions.
-
Offset gains with allowable capital losses.
4. Consider Salary Sacrifice Arrangements
Exchange salary for benefits and lower your tax bill.
Salary sacrifice can reduce taxable income and National Insurance contributions while giving you benefits such as:
-
Additional pension contributions.
-
Cycle-to-work schemes.
-
Childcare vouchers or employer-provided childcare.
This strategy works especially well for those near the £100,000 personal allowance threshold, as reducing taxable pay can help preserve allowances.
5. Structure Income Efficiently
Distribute earnings to maximise lower-rate tax bands.
Approaches include:
-
Income splitting with a lower-earning spouse or partner.
-
Using family trusts to allocate income tax efficiently.
-
Shifting investments into vehicles that generate tax-free or lower-tax income.
6. Invest Through EIS, SEIS, and VCT Schemes
Combine investment growth with tax reliefs.
HMRC-approved schemes offer generous reliefs:
-
EIS – 30% income tax relief on up to £1 million.
-
SEIS – 50% income tax relief on up to £100,000.
-
VCT – 30% income tax relief plus tax-free dividends.
While higher risk, these can significantly reduce current and future tax liabilities.
7. Review Inheritance Tax (IHT) Planning
Plan early to protect your estate.
With the nil-rate band at £325,000 and the residence nil-rate band at £175,000, many high earners face IHT exposure. Strategies include:
-
Using the £3,000 annual gift exemption.
-
Placing assets into trusts.
-
Gifting and surviving seven years to remove assets from your estate.
8. Use Charitable Donations and Gift Aid
Support causes and cut taxes.
Donations under Gift Aid boost charitable funds and reduce your tax bill. Higher-rate taxpayers can reclaim the difference between their rate and the basic rate via self-assessment. This can also help reclaim personal allowance lost due to high income.
9. Engage Professional Advice
Tax rules change — advice keeps you compliant.
Tax planning at this level requires up-to-date knowledge and careful application. A qualified adviser ensures you remain compliant while optimising your net position.
Call to Action
At Legacy Accounting, we specialise in complex tax planning for high-income earners. Our team ensures you pay no more tax than legally required — while staying HMRC-compliant.
📞 Call us: +
📧 Email: info@legacyaccounting.co.uk
🌐 Website: legacyaccounting.co.uk
🔗 Follow us: LinkedIn | Instagram | Facebook
Check Out Our Previous Blog
FAQs: Tax Planning for High-Income Earners
1. What is the additional rate of income tax in the UK for 2025?
45% for income over £125,140.
2. Can I carry forward unused pension allowance?
Yes, for up to three previous tax years, provided you were a member of a registered pension scheme.
3. Is an ISA better than a pension for tax planning?
Pensions offer immediate tax relief; ISAs offer tax-free withdrawals. The best choice depends on your goals.
4. Can charitable donations reduce inheritance tax?
Yes, leaving at least 10% of your estate to charity can reduce the IHT rate from 40% to 36%.
5. How do I reduce tax if I earn over £100,000?
Increase pension contributions, use salary sacrifice, and leverage charitable donations to restore personal allowance.
