If you were faced with a hefty tax bill in January 2025, you’re not alone. Unfortunately, by the time your Self-Assessment deadline arrives, there’s often very little you can do to reduce your tax for the current tax year (2024/25). But instead of dwelling on it, now is the perfect time to focus on the year ahead.

By planning smartly in the 2025/26 tax year, you can avoid nasty surprises next January and ensure you’re paying only what you need to HMRC—without breaking the rules.

Here are seven ways to cut your tax bill and keep more of your hard-earned money.

1. How to Use Your Pension to Lower Your Tax Bill

Contributing to a pension is one of the most effective ways to reduce your taxable income while saving for the future. If you pay into a private or workplace pension, you can claim tax relief at your highest rate:

• Basic rate taxpayers (20%) get a top-up from the government (e.g., £80 turns into £100 in your pension).
• Higher rate (40%) and additional rate (45%) taxpayers can claim extra relief through their Self-Assessment.

Bonus tip: If your income is slightly above £100,000, pension contributions can help bring it below this threshold and protect your personal allowance (more on this below).

2. Keep Your £12,570 Personal Allowance if You Earn Over £100K

Once your income exceeds £100,000, you start losing your £12,570 tax-free personal allowance at a rate of £1 for every £2 earned over this limit. This means that by the time you hit £125,140, you’ve lost your entire allowance—and you’re effectively paying 60% tax on earnings between £100K–£125K.

How to reduce this impact?

• Make pension contributions to lower your taxable income.
• Use Gift Aid (charitable donations) to bring your income below £100K.

This planning can save thousands in tax and keep your personal allowance intact.

You might also like to read: Key Tax Dates for UK business owners

3. Make Charitable Donations (and Get Tax Relief)

Giving to charity through Gift Aid can reduce your tax bill while supporting causes you care about. HMRC allows you to claim tax relief at your highest rate (40% or 45% taxpayers get additional relief).

Gift Aid donations can also help bring down your taxable income, which can be useful for:

• Protecting your personal allowance (if earning over £100K).
• Reducing the High-Income Child Benefit Charge (see next tip).

4. Avoid the High-Income Child Benefit Charge (HICBC)

If you or your partner earn over £60,000, you may have to repay some or all your Child Benefit through the High-Income Child Benefit Charge (HICBC).​

The charge is 1% of the benefit for every £200 you earn over £60,000—meaning at £80,000, you lose it all.​

Ways to reduce or avoid this charge:

• Make pension contributions to lower your adjusted income.
• Use Gift Aid donations to bring taxable income below £60K.
• Check whether the higher earner in the household is the one claiming Child Benefit.

Strategic tax planning could mean you keep more of your Child Benefit rather than paying it back to HMRC.​

5. Plan Your Student Loan Repayments Smartly

If you’re repaying a Student Loan, your repayments are based on your income:

Plan 1 & 2 loans require 9% repayment on earnings above the threshold.

Plan 4 & Postgraduate loans have different thresholds and repayment percentages.

A sudden increase in income (e.g., a large dividend or self-employment profit) could trigger higher repayments than necessary. If you know you’ll have a one-off spike in income, consider:

• Delaying invoices or deferring a bonus until the next tax year.
• Making pension contributions to reduce your taxable income.

Smart timing could save you thousands in early student loan repayments.

6. Make the Most of the Dividend Allowance & Personal Savings Allowance

If you receive dividends from investments or your own company, make sure you’re using the £500 tax-free Dividend Allowance (for 2025/26) to pay yourself efficiently. Above this, dividend tax rates apply:

• 75% for basic rate taxpayers
• 75% for higher rate taxpayers
• 35% for additional rate taxpayers

Also, don’t forget the Personal Savings Allowance (PSA):

• Basic rate taxpayers can earn £1,000 in savings interest tax-free.
• Higher rate taxpayers get £500 tax-free.
• Additional rate taxpayers get £0 (so might want to use an ISA).

Consider moving savings into an ISA or splitting investments between partners to make the most of allowances.

7. Use Marriage Allowance (If Eligible)

If you’re married or in a civil partnership, and one of you earns below £12,570, you may be able to transfer £1,260 of your tax-free personal allowance to the higher-earning partner.

This could save up to £252 per year in tax—every little helps!

Final Thoughts: Start Planning Now to Pay Less in January 2026

The key to paying less tax is being proactive. Waiting until your tax return deadline won’t help—you need to plan throughout the 2025/26 tax year. Managing your accounts monthly is also a great way to stay on top of your tax liabilities and even boost profitability.

Here’s what to do next:

• Review your income and allowances now.
• Start making tax-efficient contributions (pensions, charitable donations, etc).
• Speak to an accountant for tailored advice – small changes can lead to big savings.

The sooner you take action, the less you’ll owe HMRC next January—and the more you’ll keep in your pocket!

CTA: If you’d like us to guide you through the next tax year with tailored monthly support, feel free to get in touch via phone or email.