Part of our job is to build the right investment solution for you, helping you achieve your aims and goals. But just as important is preserving the wealth made from those investments, of which tax management forms a huge part.

With this in mind, and with tax year-end fast approaching, we’ve compiled the top 8 things you could do to protect your wealth from tax erosion.

1. Pensions tax relief – use, don’t lose, your annual allowance

Whenever you make a contribution to your pension, the Government adds money too – this is called tax relief, and it’s one of the main advantages of using a pension to save for your retirement.

Pension allowances changed in 2016, and some people lost some of the Government’s generous tax relief for pension contributions. Under carry-forward rules, you can make pension contributions above your annual allowance by carrying over unused allowance from the last three tax years.

2. Higher earners should utilise their annual allowance too

If you’re a higher earner, your standard annual allowance of £60,000 will reduce by £1 for every £2 of income earned over £260,000, until your allowance is £10,000. However, you may be able to contribute more by using carry-forward allowances from previous years.

3. Boost income as you approach retirement

If you’re close to retirement and looking to take advantage of income flexibility, you may be considering taking an income from your pension. However, if you do this, you can only contribute a maximum of £10,000 into your Defined Contribution pension this year, with no carry-forward option. If you need to access some income, it might instead be worth accessing non-pension savings or taking tax-free cash from your pension. This will avoid triggering the Money Purchase Annual Allowance (MPAA), and you could retain your £60,000 allowance.

4. Sacrifice your bonus for an employer pension contribution

It’s bonus time for some of us, and while it might be tempting to spend that money on a holiday, it might be prudent to exchange it for a pension contribution from your employer instead. You won’t have to make an NI contribution or pay income tax, meaning more money will end up in your pension than would hit your current account.

5. Business owners can take profit as pension contributions

Own a business? You could pay your profits away in pension contributions. Taking your profits as dividends means you don’t have to pay NI. But dividends are paid from profits after corporation tax, meaning you’ll lose a chunk of your profits to HMRC. You’ll also be taxed as the company’s director. Instead, making a pension contribution means NI, tax savings, and more money in your pension pot.

6. Top up your ISA

Tax year-end is otherwise known as ISA season. And for good reason – you can utilise your ISA allowance, which allows you to invest, without suffering income and capital gains tax. There’s no carry forward when it comes to ISAs, so make sure you use your full £20,000 allowance before the 5 April 2024 deadline.

7. Access your personal allowances

Contributing to your pension reduces your taxable income, which can positively affect your personal allowance and child benefit provisions. If your pension contribution reduces your annual income to below £100,000, you will receive a full, tax-free personal allowance. Meanwhile, if a pension contribution means your take-home salary is below £50,000, you will retain the full child benefit amount.

8. Reinvest your investment income

If you have an investment portfolio, it may be worth realising any gains from your portfolio, up to the value of £6,000 – the Capital Gains Tax (CGT) allowance for 2023/24. Even if you don’t need the money, you could reinvest it into other investment funds. Doing so will mean you’ll have less CGT to pay if and when you need to disinvest from your portfolio.

Finally, effective tax planning is a year-round job. It’s only at the end of the tax year that you have all the pieces to complete the planning jigsaw, but there are steps you can take now to get ahead of the game and give yourself time to put plans in place.

At Magus Wealth, we aim to build the right investment solutions for your needs, and tax planning is a huge part of this – so make sure your money is working effectively by being as prepared as you can be for the end of this tax year


Risk warnings

Past performance is not indicative of future performance. The value of an investment may fall as well as rise. You may get back less than the original amount invested.

This article should be used for information purposes only and is subject to change without notice. None of the information contained in this article constitutes financial or other professional advice in any way. If you require additional information, you should contact Magus directly.

While Magus uses reasonable efforts to ensure that the information contained within articles is current and accurate at the date of publication, no warranties are made, either expressed or implied, as to reliability, accuracy, or completeness of the information. Magus accepts no liability for any loss arising directly or indirectly from the use of or action taken in reliance on such information.

Tax legislation is that prevailing at the time, is subject to change without notice and dependent on individual circumstances. You should always seek appropriate tax advice before making decisions.