Smart income tax saving tips can make a real difference to employed taxpayers in the UK.
Whether you’re looking for ways to pay less taxes, seeking potential refunds, or planning year-end strategies, there are several areas where you might keep more of your hard-earned money.
Whilst your employer handles much of your tax through PAYE, understanding your options could help you maximise your take-home pay.
Year End Tax Tips to Consider
The end of the tax year (5th April) often prompts a flurry of financial activity, and rightly so.
This period could present valuable opportunities to review your position and potentially reduce your tax bill. Here are some essential year end tax tips to help you maximise your savings.
Firstly, consider whether you’ve made full use of your tax-efficient savings and investment options for the year.
Many allowances don’t carry over, so taking stock before the deadline could prevent you from losing valuable opportunities.
Additionally, if you’re eligible for pension contributions, maximising these before year-end could reduce your taxable income.
Higher-rate taxpayers in particular may find this approach beneficial, as pension contributions often attract tax relief at your highest rate of tax.
Check Your Tax Code Regularly
One of the most overlooked income tax saving tips is simply verifying that you’re on the correct tax code.
Your tax code determines how much tax your employer deducts from your wages, and mistakes are more common than you might think.
You’ll find your tax code on your payslip, and it’s worth checking it every few months, particularly after any life changes.
Have you changed jobs recently? Got married? Started receiving a company benefit? These situations could all affect your tax code.
An incorrect tax code could mean you’re paying too much tax each month without realising it. Common issues include:
- Being left on an emergency tax code after starting a new role, which often results in higher deductions than necessary
- Outdated information from previous employment affecting your current code
- Benefits-in-kind not being properly accounted for, leading to underpayment (and potentially an unexpected bill later)
If your code doesn’t look right, or if you’re unsure what it means, it’s worth querying it sooner rather than later.
The numbers in your code typically indicate how much you can earn tax-free, whilst the letters show your circumstances.
For instance, 1257L was a common code for those entitled to the standard personal allowance in recent years.
You can check your tax code and report any issues directly through your HMRC Personal Tax Account.
Taking a few minutes to verify this detail could potentially save you from overpaying or facing an unwelcome tax adjustment down the line.
Tips to Pay Less Taxes Throughout the Year
Beyond year-end planning, there are several effective tips to pay less taxes that employed individuals might explore throughout the tax year.
These strategies could help reduce your overall tax liability whilst remaining fully compliant.
Maximise Your Personal Allowance
Most people are entitled to earn a certain amount before paying tax (typically £12,570 for 2025/26, though this can vary).
If you’re married or in a civil partnership, you may be able to transfer unused allowance to your spouse through the Marriage Allowance, potentially saving up to several hundred pounds annually.
Consider Salary Sacrifice Arrangements
If your employer offers salary sacrifice schemes, these could reduce your taxable income. Common options might include:
- Additional pension contributions
- Childcare vouchers (if you joined the scheme before October 2018)
- Cycle to work scheme
The potential savings will depend on your individual circumstances and tax bracket.
Claim Eligible Work Expenses
If you incur expenses wholly, exclusively, and necessarily for your employment, you may be able to claim tax relief. This could include:
- Professional subscriptions required for your role
- Tools and equipment needed for work
- Working-from-home costs if applicable
Keeping good records throughout the year could support any claims you wish to make.
Don’t Forget About Using an ISA
Individual Savings Accounts represent one of the most straightforward ways to shelter your money from tax, yet surprisingly many employed taxpayers leave their allowance unused each year.
Why ISAs Matter for Tax Planning
The appeal of an ISA lies in its simplicity. Any interest, dividends, or capital gains you earn within the ISA wrapper are completely free from income tax and capital gains tax.
For basic-rate taxpayers, this might not seem crucial initially, but as your savings grow or if your income increases, the benefits become increasingly apparent.
Higher and additional-rate taxpayers could find ISAs particularly valuable.
Without ISA protection, investment income above certain thresholds gets taxed at higher rates.
Dividends beyond the dividend allowance and savings interest beyond the personal savings allowance could both eat into your returns if held outside an ISA.
Making the Most of Your ISA Allowance
The annual ISA allowance is substantial, and unlike some other tax reliefs, you cannot carry forward unused allowances from previous years.
Each tax year presents a fresh opportunity, but once 5th April passes, any unused allowance from that year disappears.
Different types of ISAs suit different needs:
- Cash ISAs – Might appeal if you’re saving for something specific in the near term and want guaranteed returns
- Stocks and Shares ISAs – Could be worth considering for longer-term goals where you’re comfortable with some investment risk
- Lifetime ISAs – Offer government bonuses for first-time buyers or retirement savers, though they come with specific conditions and access restrictions
Setting up a standing order to regularly contribute to your ISA throughout the year, rather than scrambling before the deadline, could make the process far less stressful.
Even modest monthly amounts can accumulate meaningfully over time, and the tax protection applies from day one.
Tax Refund Tips: Are You Due Money Back?
Many employed taxpayers don’t realise they might be entitled to a tax refund.
These tax refund tips could help you identify whether HMRC owes you money. Here are some situations where you could be due a refund:
- Job changes and emergency tax codes – You may have overpaid tax if you’ve changed jobs during the tax year, particularly if you had periods of unemployment. The emergency tax code sometimes applied to new roles could result in overpayment
- Work-from-home allowances – These became particularly relevant in recent years. If you’ve been required to work from home, even for just one day per year, you might be able to claim tax relief on working from home costs
- Professional fees and subscriptions – Costs you’ve paid personally could qualify for relief if they’re relevant to your employment and on HMRC’s approved list
- Uniform cleaning and maintenance – If you wear a uniform for work and clean it yourself, you might be entitled to a standard flat-rate deduction
If you believe you’re owed a refund, you can claim directly through HMRC’s online services.
Our quick guide to claiming employment related expenses can help you find out what you can claim and how to claim it back from HMRC.
Planning for the Future: Inheritance Tax Tips
Whilst inheritance tax might seem distant for employed taxpayers focused on current income, these inheritance tax tips could prove valuable, particularly if you’re building wealth or expect to receive an inheritance yourself.
The nil-rate band currently sits at £325,000, with an additional residence nil-rate band potentially available if you’re passing on your main home to direct descendants.
Understanding inheritance tax thresholds and rates is essential for effective planning. There are several approaches that might help reduce potential inheritance tax liability:
- Regular gifts from income – These could potentially fall outside your estate immediately if they meet certain conditions and don’t affect your standard of living
- Annual gift exemptions – You might consider using these (typically £3,000 per year, plus potentially small gifts to multiple people). Whilst these amounts might seem modest, consistent use over time could add up
- Pension contributions – These often sit outside your estate for inheritance tax purposes, which could make them attractive for wealth that you’re building for future generations
- Writing a will – Keeping it updated could ensure your estate is structured efficiently and your wishes are carried out as intended
Early inheritance tax planning can make a significant difference to what your beneficiaries ultimately receive.
Keeping Accurate Records
Whatever strategies you consider, maintaining good records throughout the year could prove invaluable. Key documents to keep include:
- Payslips from all employment
- P60s (annual tax summaries)
- Receipts for work expenses
- Documentation of any claims you make
- Records of pension contributions and ISA deposits
Digital copies stored securely could make life much easier when you need to review your tax position or submit information to HMRC.
Stay Informed About Tax Changes
Tax rules and allowances can change with each Budget and Finance Act. Rates, thresholds, and available reliefs might be adjusted, so staying reasonably informed about changes that could affect you is generally worthwhile.
Setting aside time once or twice a year to review your tax situation could help you identify new income tax saving opportunities or changes you need to address.
This proactive approach ensures you’re always taking advantage of the most current tax-saving strategies available to employed taxpayers.
A Final Word
These income tax saving tips are intended as general guidance, and everyone’s situation is different.
What works brilliantly for one employed taxpayer might be less relevant for another, depending on your income level, family situation, and financial goals.
Whether you’re implementing year end tax tips, exploring ways to pay less taxes throughout the year, claiming tax refund tips for money owed to you, or considering inheritance tax tips for the future, taking action could make a meaningful difference to your finances.
Tax rules can be complex, and it’s often worth seeking professional advice for your specific circumstances, particularly for more complex matters like inheritance tax planning or if you have income from multiple sources.
The potential savings from proper tax planning could far outweigh any professional fees you might incur.
Remember, all these suggestions are about working within the tax system to pay what you legitimately owe – nothing more, nothing less.
Understanding your options and taking appropriate action could help ensure you’re not paying more tax than necessary whilst staying completely within the rules.
