3 Expert-Backed Strategies to Reduce Your Income Tax Bill
Taxes have been rising for many years, over various governments.
However, since the October 2024 budget, this trend accelerated, when it was announced that there would be £40 billion in tax increases.
These are the largest increases since 1994, with the Office for Budget Responsibility (OBR) warning they would be lead to the highest ever tax burden as a share of GDP.
Recent changes include:
Employer National Insurance increases
Capital Gains Tax (CGT) up from 10-18% and 20-24%
Inheritance tax (IHT) – Agricultural and Business Property Relief reduction
Stamp duty on second homes rising from 3% → 5%
VAT on private school fees from January 2025
These shifts mean professionals, families, and business owners are paying more than ever.
The good news? There are still highly effective, government-backed ways to reduce your income tax bill.
Venture Capital Trusts (VCTs)
VCTs allow you to invest in innovative UK businesses (such as Zoopla and Graze) while benefiting from generous tax reliefs.
Benefits:
30% income tax relief (up to £200,000/year)
Tax-free dividends
No Capital Gains Tax on disposal
Considerations:
Must hold for at least 5 years
Higher-risk investments
Pension Contributions
Pensions remain one of the most powerful tax-saving tools.
Current rules:
Annual allowance: £60,000 (with carry forward, up to £220,000)
20% government top-up automatically added
Higher rate taxpayers reclaim an extra 20% relief
Additional rate taxpayers reclaim 25% relief
Contributions can restore lost personal allowance (effective 60% relief)
Example:
You have relevant income of £125,000
Contribute £20,000 into your pension
£5,000 government top-up – 20%
£5,000 additional tax relief – 20%
Personal allowance restored – saving a further £5,028
Total tax saving = £15,000 by contributing £20,000
Enterprise Investment Schemes (EIS)
EIS offers some of the most generous reliefs available for experienced investors.
Benefits:
30% income tax relief (up to £1m, or £2m for knowledge-intensive companies)
“Carry back” relief to the previous tax year
Capital Gains Tax deferral – no CGT on death
No Inheritance Tax after 2 years
Loss relief against income
Considerations:
Minimum 3-year holding period
High-risk investments (examples include Gousto, ManyPets)
Why Professional Advice Matters
These strategies can be powerful – but the right solution depends on your goals, circumstances, and appetite for risk.
Speak to one of our financial planners to assess the right solution based on your personal circumstances.
Email info@mlpwealth.co.uk
or call us on 020 8296 1799
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.