10 Tax-Saving Strategies to Maximise Your UK Tax Refund

Many of the strategies to follow have different benefits and drawbacks depending on where you sit on the tax ladder. So, first things first is to understand where your income falls in the UK’s tax bands. For the 2024/2025 tax year, the rates are:

Personal Allowance	The first £12,570 of income is tax-free
Basic Rate	20% tax on income between £12,571 and £50,270
Higher Rate	40% tax on income between £50,271 and £125,140
Additional Rate	45% tax on income above £125,140

These rates are for earned income, with rates for dividends and capital gains charged at different rates.

Salary sacrifice allows you to instruct your employer to deduct money for certain things before they calculate your tax. The options will vary by employer, but some common options include health insurance, life insurance, gym memberships or car leases. 

Because this comes from pre-tax money, it saves you income tax while still funding something you would otherwise have had to pay from after-tax money.

This might not be possible for everyone, but if you expect higher earnings in a particular year, you may want to consider options for spreading your income across multiple tax years. Some employers offer flexibility over when and how they pay bonuses, while self-employed people will generally have more flexibility over the timing of their income.

This strategy is particularly important if you have lodged a large capital gain during the year, which can push you into a higher tax bracket.

While it is often possible to salary sacrifice pension contributions, you can also claim tax relief for contributions you make with after-tax money. This is a great way to generate a tax refund in the 2025 tax year, as it can be done at any time before the 6th April.

Contributions to pensions receive tax relief based on your income tax band. Basic rate taxpayers receive 20% tax relief automatically, which is paid directly into your pension fund. If you’re a higher or additional rate tax payer, you can claim an additional 20% or 25% through your self-assessment tax return.

Depending on your other income for the year, this could mean you receive the full amount of tax relief back as a tax refund.

While ISAs don’t provide you any immediate tax benefits in the form of a tax refund or reduced income tax liability for this year, regular contributions over time can make a huge difference to your taxable income in future years.

ISAs provide tax-free growth on savings and investments, and for the 2024/2025 tax year, the annual ISA allowance is £20,000 per person.

Over time, this means you could build up a sizable amount of wealth in a totally tax free account, as opposed to general investment or stock trading accounts which are liable for dividend tax and capital gains tax.

Capital gains tax (CGT) can be expensive come the end of the tax year, especially with the Autumn Budget making substantial increases to the basic and higher rates of CGT. Thankfully, there are some key strategies you can use to reduce CGT.

Utilise your annual exemption

The annual exempt amount for CGT is £3,000 per person. That’s not a huge amount, but you should aim to use it every year in order to maximise the tax efficiency of your portfolio. A worthwhile strategy is to look to rebalance your portfolio each year to use up this annual exemption.

Review ownership with your husband, wife or civil partner

If you’re married or in a civil partnership, you can transfer assets between you without triggering a CGT event. That means that any capital gains could be split between both of you, giving you two sets of annual exemption and a gain that is spread across the tax brackets of two people.

In some cases, where one partner has a much lower income than the other, it may even be worth transferring the entire asset to the lower earning person, to take advantage of lower tax rates.

Any costs you incur related to your job can potentially be eligible for tax relief. That doesn’t mean that you can expense an entire family trip to Disneyland if you check a few emails while you’re there, but the list of what you can claim is probably broader than you think.

Some simple examples which are often missed include:

Professional subscriptions

Fees paid to approved professional bodies can be deducted, as well as membership of websites or media publications related to your industry.

Homeworking allowance

If you work from home, you could be eligible for tax relief on additional household expenses.

Charitable donations give you immediate tax relief, but with a twist. You are able to claim back the tax relief yourself in the form of a tax refund, or if the charity is eligible for Gift Aid, you can use the tax relief to boost your donation by a further 25% at no cost to you.

 Charities can claim back 25p for every £1 you donate, and higher and additional rate taxpayers can still claim the difference between the basic rate and their tax band.

This can be a great option if you want to do some good with your money, as well as being tax-efficient. It’s also worth noting that you don’t have to give to large charities. There are many smaller, local charities who would benefit significantly from donations, and even some local cultural and sporting organisations might qualify.

For expats, tax time comes with extra complexity. If you’ve spent some or much of the year in a different country, or you have assets spread around the world, you need to be crystal clear on where you stand from a tax residency point of view.

 You should check if your income is protected by a double taxation agreement between the UK and your country of residence, review offshore accounts to make sure they’re structured properly, and ensure you’re complying with all the relevant tax rules.

 One common pitfall is the use of ISA allowances, which aren’t available to non-UK tax residents.

It might seem obvious, but working with the right professionals is a must to make sure your strategy is efficient and compliant.

A financial adviser can help identify opportunities for tax savings and help you plan for your finances around things like tax residency, while an accountant can ensure that you’re complying with all the relevant tax rules and maximising your tax refund come self-assessment time.