March 19, 2026
For many higher-rate and additional-rate taxpayers in particular, income tax is a major annual expense.
The good news is that the UK tax system offers a wide range of allowances and reliefs that offer legal ways to reduce tax for basic-rate, higher-rate and additional-rate taxpayers —if you use them effectively. The challenge is that these rules change frequently, and the most valuable opportunities need to be used before each tax year ends on 5th April.
The even better news is that you don’t have to navigate these UK tax saving strategies alone.
A structured review with an independent financial adviser (IFA) can help you understand which tax-saving strategies apply to you and how to use them in the most efficient way.
Making full use of your personal allowances to reduce income tax
For high earners, pension contributions are one of the most powerful tools for reducing income tax. Contributions receive tax relief at your marginal rate, meaning a £1,000 contribution effectively costs a higher-rate taxpayer £600 and an additional-rate taxpayer £550.
If you haven’t maximised annual allowances in the previous three tax years, you may be able to ‘carry forward’ unused allowance to make a larger contribution in the current year. This is a complex area and professional advice is essential, but it can be very useful for those with fluctuating income, bonuses, or large severance packages.
With the dividend allowance reduced to £500 and the CGT allowance at £3,000, high earners need to plan carefully. Using ISAs, pensions and other tax-efficient investment structures can be a way to shield dividends and gains from tax. If you expect to realise significant gains – selling an investment property, for example – taking advice early could help you avoid unnecessary tax charges.
ISAs remain one of the most effective ways to reduce income tax and capital gains tax. You can invest up to £20,000 each year, with all future income and gains free from tax.
Parents can also contribute up to £9,000 per child into a Junior ISA, though the funds become the child’s once they reach age 18.
If one spouse or civil partner earns below the personal allowance (£12,570) and the other is a basic-rate taxpayer, up to £1,260 of unused allowance can be transferred, saving up to £252 in the current tax year. This is a simple but often overlooked way to reduce the household tax bill.
If you earn small amounts from a side hustle – selling items online, occasional freelance work, or renting out a driveway or storage space, for example – the first £1,000 of trading income and £1,000 of property income can be tax-free. Rent-a-Room relief also allows up to £7,500 tax-free from letting a furnished room in your own home.
If you incur costs doing your job, you may be able to claim tax relief on:
Donations to charity under the Gift Aid scheme offer a direct benefit to the charity, who can claim 25p for every £1 donated – as long as your income tax liability is at least as much as the tax claimed.
Higher-rate and additional-rate taxpayers can claim an extra 20% or 25% being the difference between the basic-rate and the highest rate of tax you’re liable to.
Why professional financial advice is particularly important for high earners
The more you earn, the more complex your tax position becomes. Allowances interact, thresholds taper, and the order in which you use reliefs can make a significant difference. A Talis IFA can help you:
At Talis IFA, we help our clients understand both their current financial position and the options that are available to them to make their money work harder for them. A Talis IFA will give you transparent, plain-English advice that gives you the confidence to make appropriate, tax-efficient decisions based on your personal circumstances.
This article does not constitute tax or legal advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For guidance, seek professional advice.
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