Donating to charity is its own reward, but if you are a UK taxpayer and you are not using Gift Aid, you are leaving money on the table for both you and the charities you support.

Used properly, Gift Aid can boost your donation by 25 per cent at no extra cost to you and (for higher and additional-rate taxpayers) can deliver a meaningful reduction in your own tax bill.

How Gift Aid works

When you make a Gift Aid declaration on a donation, the charity can reclaim the basic-rate tax (20 per cent) you originally paid on the income you used to make the gift.

In practice, that means:

• You donate £100
• The charity claims an extra £25 from HMRC
• The charity receives a total of £125

There is no cost to you for this part. The only requirement is that you have paid at least as much Income Tax or Capital Gains Tax in the tax year as the basic-rate tax the charity will reclaim.

The hidden tax saving for higher earners

This is where Gift Aid becomes a genuine planning tool.

For higher-rate taxpayers, Gift Aid extends your basic-rate band by the gross value of the donation. That means an additional 20 per cent of tax relief comes back to you through your Self-Assessment return.

For additional-rate taxpayers, the relief is 25 per cent.

A worked example. A higher-rate taxpayer donates £1,000 to charity:

• The charity claims an extra £250, taking the total donation to £1,250
• The donor can claim back £250 of higher-rate tax relief through their tax return
• The net cost of the £1,250 donation to the charity is £750

For an additional-rate taxpayer, the net cost falls to around £687.50.

The £100,000 threshold benefit

Gift Aid is particularly powerful for anyone whose income sits in the Personal Allowance taper zone between £100,000 and £125,140.

A Gift Aid donation reduces your adjusted net income by the gross amount of the donation. That can bring you back below the £100,000 threshold and restore some or all of your Personal Allowance, on top of the standard higher-rate relief.

In some cases, this produces an effective tax saving of around 60p in the pound.

The same logic applies for parents affected by the High Income Child Benefit Charge between £60,000 and £80,000.

Other ways to give tax-efficiently

Gift Aid is not the only option. Depending on your circumstances, you may also benefit from:

• Payroll Giving – Donations are made before tax through your salary
• Gifts of shares or property – Relief from both Income Tax and Capital Gains Tax
• Legacy gifts in your will – Charitable gifts reduce your estate for Inheritance Tax and gifts of 10 per cent or more of your estate can reduce the IHT rate from 40 to 36 per cent

Keeping the right records

To claim higher or additional-rate relief, you will need to keep:

• Records of the date and amount of each donation
• Confirmation of the Gift Aid declaration
• Receipts from the charities where available

These details should be included on your Self-Assessment return.

If you are a regular donor to charity or are considering a larger gift, speak to us about making the most of Gift Aid. We can help you maximise the value of your donations to good causes and the relief available to you in the process.

Inheritance Tax (IHT) is rarely a popular topic, but with the nil rate band frozen at £325,000 since 2009 and house prices rising, a growing number of estates are being caught in the net.

One of the most useful (and most under-used) reliefs available is the normal expenditure out of income exemption, often known simply as “gifts out of regular income”.

Used properly, it can move significant sums out of your estate immediately, with no seven-year rule to worry about.

What is the exemption?

In most cases, gifts made during your lifetime are treated as Potentially Exempt Transfers (PETs). They only fall outside your estate for IHT purposes if you survive seven years from the date of the gift.

The normal expenditure out of income exemption works differently. Gifts that meet its conditions are immediately outside your estate, regardless of how long you live afterwards.

There is also no upper limit on the amount, provided three conditions are genuinely met. To qualify, a gift must satisfy all of the following:

1. It must be made out of your income, not capital
2. It must be part of a regular pattern of giving, or made with the clear intention of becoming so
3. It must leave you with enough income to maintain your usual standard of living

The “regular pattern” point is the one most people misunderstand. The gifts do not have to be identical amounts on identical dates, but they should follow a recognisable rhythm.

Monthly contributions to a grandchild’s school fees, annual gifts to children to support their pension contributions or quarterly payments into a trust are all common examples.

Why income, not capital, matters

The exemption applies only to gifts out of surplus income. This usually means:

• Salary or pension income
• Interest from savings
• Investment income such as dividends and rent

Withdrawing from an ISA or selling shares to fund a gift would generally be treated as a capital gift.

Done sensibly though, regular income (after tax and normal living costs) can be passed on year after year with no IHT liability.

The importance of evidence

On your death, your executors will need to demonstrate to HMRC (using form IHT403) that the gifts were genuinely out of income and part of a regular pattern.

The clearer the record, the easier that conversation becomes, but this is an area where many otherwise valid claims fail.

Good practice includes:

• A written statement of intent at the start of the gifting pattern
• A clear record of income and expenditure each year
• Bank statements showing the income source and the gift leaving the same account
• Evidence that your standard of living was maintained

We help clients set this up properly so the exemption holds up to scrutiny later.

Why it is worth doing now

With unspent pension funds set to be brought into IHT from April 2027 and the nil rate band frozen for years to come, more estates than ever are going to face a 40 per cent tax charge.

Using the exemption from regular income year after year is one of the most powerful but overlooked ways to bring that future IHT bill down.

If you have surplus income and would like to pass more of it to family or other beneficiaries while reducing your future IHT bill, please get in touch with us today. We will help you set up the exemption properly.

A salary increase should be cause for celebration, especially with the current cost of living stretching even the largest paycheques.

However, in reality, for a growing number of UK earners, hitting certain income thresholds can mean keeping less of every additional pound than they expected.

Frozen tax bands, the tapering of the Personal Allowance and the High Income Child Benefit Charge all combine to create some genuinely punishing effective tax rates.

If you have just had a pay rise or are hoping for one soon, it is worth understanding exactly where the tax traps are easily sprung.

The £100,000 cliff edge

The most punishing of all is the loss of the Personal Allowance for earnings between £100,000 and £125,140.

The Personal Allowance is the £12,570 of income you can earn tax-free. Once your adjusted net income passes £100,000, that allowance is reduced by £1 for every £2 of income above the threshold, which means by £125,140 it has gone entirely.

On every pound earned between £100,000 and £125,140, you lose 40 per cent in higher-rate Income Tax plus a further 20 per cent through the lost allowance, giving an effective marginal rate of 60 per cent. Throw in National Insurance and your rate of take home pay shrinks even faster.

The High Income Child Benefit Charge

If you or your partner claim Child Benefit, another trap kicks in once either of your individual incomes passes £60,000.

Between £60,000 and £80,000, Child Benefit is gradually clawed back through the High Income Child Benefit Charge. Above £80,000, it has been wiped out entirely.

For a family with two children, this can add the equivalent of an extra eight to 10 per cent of marginal tax to that income band.

Combined with higher-rate Income Tax and National Insurance, some parents face effective marginal rates of around 60 per cent on income they had assumed would simply boost the household.

Frozen thresholds are quietly making it worse

Most Income Tax thresholds have been frozen since 2021/22 and are due to stay frozen until at least 2031, but wages continue to grow as employers battle with inflation to retain the best talent.

That mismatch is what the Office for Budget Responsibility calls “fiscal drag”. Every year, more people are dragged into higher-rate tax, the Personal Allowance taper or the Child Benefit charge simply because their pay has gone up with inflation, while the thresholds have not.

If you were a basic-rate taxpayer a few years ago, a couple of routine pay rises may have quietly pushed you into a much higher effective rate. Whilst you may still take home more cash than before after tax, a larger proportion of your salary is being taxed.

What you can do

There are several ways to reduce your adjusted net income so that you can continue to benefit from each new pay rise:

• Pension contributions – Increasing personal or salary sacrifice contributions reduces taxable income.
• Gift Aid donations – Allows you to extend your basic rate band and reduce adjusted net income for the £100,000 threshold.
• Salary sacrifice for other benefits – Cycle to work schemes, electric vehicles and additional holiday are all forms of tax efficient benefit in kind to consider.
• Timing of bonuses – Where flexibility exists, deferring income across tax years can help, so where possible ask if you can delay bonuses or other performance related pay.

If you have had a pay rise or expect to cross one of these thresholds in the current tax year, get in touch. We can model your position and help you take home more of what you earn.

If you have moved cash into a higher-paying savings account over the last couple of years, you are far from alone.

With interest rates climbing, savers have been chasing better returns. The problem is that many are now being caught by an unexpected tax bill they did not see coming.

Recent figures suggest the average savings tax bill for higher-rate taxpayers has now reached more than £2,300 a year, with HMRC quietly clawing back tax through PAYE coding adjustments.

For additional rate taxpayers the figure is closer to £7,000. And changes to ISAs on the horizon are likely to make things worse.

Understanding the Personal Savings Allowance

The Personal Savings Allowance (PSA) lets you earn a certain amount of interest each year without paying tax. The thresholds are:

• £1,000 for basic-rate taxpayers
• £500 for higher-rate taxpayers
• £0 for additional-rate taxpayers

With a five per cent easy-access savings account, a basic-rate taxpayer hits the PSA limit on around £20,000 of savings. A higher-rate taxpayer hits theirs on just £10,000.

Beyond those points, every additional pound of interest is taxed at your usual Income Tax rate of 20, 40 or 45 per cent.

Why so many people are being caught out

There are three reasons for the rise in unexpected tax bills.

First, interest rates have climbed sharply since 2022, while the PSA has stayed frozen since it was introduced in 2016.

Second, frozen Income Tax thresholds mean more people are now in the higher-rate band, where the PSA is halved or removed entirely.

Third, HMRC collects the tax automatically for most savers by adjusting their PAYE tax code. The first many people know about it is when their pay packet shrinks the following year.

If you complete a Self-Assessment return, the obligation is on you to declare interest from all your accounts each year.

The looming ISA changes

ISAs remain the simplest defence against savings tax. Interest earned within an ISA is tax-free, does not count towards your PSA and does not need to be declared.

Proposed changes would reduce the annual Cash ISA limit from £20,000 to £12,000 for under-65s from 2027, with the difference only available through Stocks and Shares ISAs.

HMRC has also announced a new 22 per cent tax rate on uninvested cash in Stocks and Shares ISAs.

For younger savers building a cash buffer, that is a significant tightening. It is likely to push more people into taxable savings accounts and increase the number caught out by the PSA.

What you can do

A few sensible steps will go a long way:

• Use your full ISA allowance as early in the tax year as possible
• For couples, make sure you are using both partners’ PSAs through individual accounts
• Consider whether NS&I Premium Bonds, gilts or other tax-efficient products might suit
• Keep a running record of interest earned each year so nothing surprises you

For savers approaching or already in higher-rate territory, professional advice can make a meaningful difference to your net returns.

If you are worried about an unexpected savings tax bill or want to make sure your savings strategy is as tax-efficient as possible, get in touch with our team. We will help you protect more of what you have worked hard to save.

For sole traders, self-employed individuals and landlords with gross annual incomes exceeding £50,000 from self-employment or property, you must now comply with Making Tax Digital (MTD) for Income Tax.

Applied from 6 April 2026, these new responsibilities require those affected to provide quarterly updates of their income and expenses to HMRC.

The first date you need to mark in your calendar for quarterly update reporting in the 2026/27 tax year is 7 August 2026.

What do you need to provide by 7 August?

For this first submission, you will need to provide a summary of your income and allowable business expenses for the period 6 April to 5 July 2026.

This should include:

• All sales or income received between 6 April and 5 July
• A breakdown of your business expenses by category, such as travel, office costs, software, professional fees and other allowable costs
• Any corrections to figures already entered in your software during the period

If your income has fallen, even if it is nil during the current period, you will still need to submit an update provided you earned £50,000 or more in the 2024/25 tax year.

Separate quarterly updates are required for each business or property rental. The quarterly updates will include the digital records for your self-employment and property income and expenses from the previous three months, together with those digital records already created since the 6 April and any corrections you have made to these.

The periods that your quarterly updates cover will make it easier for you to correct errors throughout the tax year, so there is no need to resend the original quarterly update after making a correction.

If you are not sure what information you need to provide, you can contact our team, who are happy to advise you.

How to submit your quarterly MTD update

The update must be sent using HMRC-recognised MTD-compatible software, either by you or an agent on your behalf.

This could be bookkeeping software such as Xero, QuickBooks, Sage Accounting or FreeAgent or a spreadsheet linked to HMRC-compliant bridging software.

Our team can help you find and onboard the software you feel most comfortable using.

If you are obligated to report your income under this first phase of MTD, making the switch sooner rather than later means you can get comfortable with the new process and avoid last‑minute stress before 7 August.

Speak to our team for help preparing for your first MTD quarterly update.

The deadline for online Self-Assessment tax returns is 31 January, which feels comfortably far away for most people in the summer months.

The reality is that the tax year ended on 5 April, which means your 2025/26 return can be filed any time from 6 April 2026 onwards.

There is no advantage to leaving it until the last minute and several good reasons to get it done early.

You will know what you owe sooner

One of the biggest myths about Self-Assessment is that filing your return early means paying your tax bill early.

This one is easy to dispel as the payment deadline of 31 January remains exactly the same regardless of when you submit your return.

What filing early actually gives you is time to budget and set money aside calmly rather than scrambling for it in late January.

For anyone with a larger or more complex tax position, that breathing room can be extremely useful. 

Refunds arrive faster

If you are due a refund, for example, because you overpaid tax through PAYE, made pension contributions or had gift aid donations to claim, the sooner you file, the sooner that money is back in your account.

Refunds claimed in April or May are often processed within a few weeks, whereas those claimed in late January can take considerably longer as HMRC works through the rush.

You can plan for the rest of the year

Filing early gives you a clear picture of where you stand for the current tax year too.

Knowing exactly what you owe for 2025/26 makes it far easier to plan ahead for things like:

• Pension contributions to manage higher-rate tax exposure
• ISA top-ups before the tax year end
• Charitable giving with gift aid
• Dividend and salary planning if you are a director

These are decisions best made in good time, not in the final weeks of the tax year.

You avoid the late-filing trap

HMRC’s penalty regime for late filing is stricter than many people realise. An immediate £100 fine kicks in the moment you miss the 31 January deadline, with daily penalties of £10 stacking up after three months.

After six months the penalties grow further and can become fairly significant over time.

Filing early removes that risk entirely and avoids the inevitable last-minute rush when both you and your accountant are under maximum pressure.

Help is easier to get when you ask early

The best time to speak to your accountant is not in late January, it is now. Talking to us earlier in the year means more time for tailored advice and a more relaxed conversation about what your tax position really looks like.

Speak to us today about getting your Self-Assessment return filed early.

As 5 April approaches and the tax year ends, it is easy to assume that tax planning is something to deal with later.

Whether you complete a Self Assessment return, have multiple income sources or simply want to avoid paying more tax than necessary, taking time to review your position before the tax year closes can make a real difference.

Here are five key areas to consider before the deadline.

1. Have you used your personal allowances fully?

Everyone is entitled to a personal allowance, but it is not always used efficiently.

If you have multiple income streams, such as employment income, rental income, dividends or savings interest, it is worth checking how these interact. In some cases, income can be structured or timed to ensure allowances are not wasted.

For couples, it may also be worth reviewing whether income can be shared more efficiently, particularly where one person pays tax at a lower rate.

2. Are your savings and investment allowances being maximised?

Many people forget that savings and investments come with their own tax-free allowances.

Depending on your circumstances, you may be entitled to:

• A Personal Savings Allowance
• A dividend allowance
• An ISA allowance

Using these before five April can help reduce future tax bills. Once the tax year ends, unused allowances are lost and cannot be carried forward.

 3. Have you reviewed Capital Gains Tax exposure?

If you are planning to sell assets such as shares, investments or property, timing matters.

Each individual has an annual Capital Gains Tax allowance. Realising gains before five April can allow you to use the current year’s allowance, rather than carrying the full gain into the next tax year.

It may also be possible to spread disposals across tax years or transfer assets between spouses or civil partners to reduce the overall tax charge.

4. Are pension contributions being overlooked?

Pension contributions remain one of the most effective ways to reduce tax.

Contributions made before the end of the tax year can attract tax relief at your highest marginal rate, increasing the value of what you save for the future while lowering your current tax bill.

It is important to ensure contributions stay within annual allowance limits and align with your wider financial plans, but for many people this is an area that is underused.

5. Have you considered your Inheritance Tax position?

While Inheritance Tax is often seen as a longer-term issue, the tax year-end can still be a useful prompt to review your position.

Making use of annual gifting allowances, reviewing larger lifetime gifts or considering whether assets are held in the most appropriate way can all have a meaningful impact over time.

Even small, regular steps taken now can help reduce future exposure and ensure that more of your wealth passes to the people you intend.

Need help preparing for the new tax year?

Tax year-end planning does not need to be complex, but it does need to be timely.

A short review before five April can help you:

• Reduce unnecessary tax
• Avoid missed allowances
• Feel more in control of your finances

If you are unsure whether you are making the most of the current tax year, seeking advice before the deadline can help ensure nothing important is missed.

Recent tax changes signal a clear shift in how business owners, directors and higher earners are taxed.

For a long time, remuneration planning has centred on a familiar mix of salary, dividends and pension contributions to protect take-home pay.

That landscape is now tightening. Several well-established planning routes are being restricted, reflecting a deliberate move by the Government towards what it frames as greater fairness across the tax system.

Fiscal drag continues to do the heavy lifting

Income Tax and National Insurance thresholds remain frozen until 2031. As wages rise, more people are pulled into higher tax bands without any real increase in spending power.

For directors already close to higher or additional rate thresholds, even small pay increases can have a disproportionate impact. Those in the additional rate band may also see further erosion of the personal allowance. The overall effect is a higher effective tax burden and fewer ways to mitigate it.

Dividend tax changes reduce flexibility

Dividends have traditionally offered a tax-efficient way to extract profits. From April 2026, the main dividend rates increase by two per cent:

• The ordinary rate rises from 8.75 per cent to 10.75 per cent
• The upper rate increases from 33.75 per cent to 35.75 per cent
• The additional dividend rate remains at 39.35 per cent.

Dividends still retain an advantage over salary, but the gap is narrowing. This makes it increasingly important for directors to review how profits are drawn and whether the existing balance between salary and dividends still makes sense.

Pension planning and the narrowing window

Pensions continue to play a central role in tax-efficient remuneration. However, from April 2029, tax and National Insurance relief on salary sacrifice pension contributions will be limited to the first £2,000 each year.

While this reduces long-term flexibility for higher earners, it also creates a planning opportunity in the years ahead.

Reviewing contribution levels now, while current rules remain in place, may help soften the impact of wider tax changes, provided this aligns with cashflow and business priorities.

What this means for business owners and directors

The direction of travel is clear. The tax environment is becoming more restrictive and many familiar planning tools are being scaled back.

That does not mean opportunities have disappeared, but it does mean that forward planning is more important than ever.

Understanding how these changes interact, rather than viewing them in isolation, will be key to maintaining resilience and control.

We continue to support clients in reviewing remuneration structures, long-term planning and overall financial strategy in light of the evolving rules.

If you would like to explore how these changes affect your own position, please get in touch.