8 tax-efficient ways to get ahead early in the tax year

The start of this tax year triggered several major changes ranging from slashed capital gains and dividend allowances to frozen personal tax thresholds, a fresh cut to the main rate of employee National Insurance (NI), an 8.5% state pension increase and a flurry of new rules for Individual Savings Account, or ISAs. 

With so much change afoot, it’s a wise move for investors to get on top of their finances at the start of the tax year rather than leave critical money decisions until the end. Try these eight tax-efficient tips to get your finances in shape to help avoid headaches further down the line. 

1. Download HMRC’s free app

The HMRC’s app is a secure and quick way you can access personal tax information and action everyday tasks, gain greater oversight of finances and avoid busy HMRC phone lines. It could suit investors keen to explore tax-efficient ways to manage multiple sources of income, such as those at risk of tipping into a higher tax bracket. Benefits include:

• Option to store your National Insurance number in a secure place such as an Apple or Google wallet
• Edit and update your personal details and preferences such as a new address, how HMRC contacts you
• Access key information such as your tax code (more on that later), your annual tax summary including a breakdown of your total income, your tax-free amount and how much tax and National Insurance you will pay this tax year or have paid in previous tax years.  
• Check your state pension entitlement
• Complete your self-assessment tax return and check your benefits
• Apply for the marriage allowance – this is where a higher earner in a married couple transfers a portion of their personal allowance to their lower earning spouse or civil partner to reduce their tax liability, if they are eligible

Good to know – you need a Government Gateway user ID and password before you can use the app. Registration typically involves information such as your name, email address, a National Insurance number, passport, pay slips or P60. Once you have a Government Gateway User ID, download the app and set up a PIN code or facial or fingerprint recognition to make future logins easier. 

2. Check your tax code

A tax code is the series of numbers and letters used by employers and pension providers to calculate how much tax to deduct from your wages or pension. It is your responsibility to check your tax code is correct, not your employer’s or HMRC’s.

Did you know incorrect tax codes are commonplace? You could be paying more tax than you need to, or you could end up with a tax bill because you’ve paid too little.

Typical situations for tax code errors include:

• Income earned from multiple sources such as a side hustle, rental income or if you have recently retired
• Technical glitches and inaccuracies can happen when you file your return such as a person’s main source of income mistakenly dropping off the system could cause a major headache  
• You can rectify anything that appears incorrect through your Personal Tax Account either using the HMRC app or online

Checking your tax code at the start of the tax year makes sense because it spreads any extra payments over a longer period. If you leave checking your tax code until later in the year, HMRC might have to take larger chunks from your pay cheque to cover any shortfall.

Good to know – those who have overpaid can receive an instant rebate in their next salary payment.

3. Complete your self-assessment tax return now – avoid a big bill in January

Getting your tax return in early can help keep a budget on track particularly if you have a large tax bill to pay. No one wants to be hit with a large tax bill in January, just weeks after the extra expense that comes with the festive period.

Most UK taxpayers don’t need to file a tax return because tax is automatically deducted from their wages – known as Pay-As-You-Earn, or PAYE – pensions or savings. It’s mandatory to file a tax return this tax year if you:

• Do not have tax automatically deducted
• Have earned extra untaxed income, such as from property
• Earned a total taxable income of more than £150,000

Good to know – Remember to claim higher or additional tax relief on pension contributions, as well as subscriptions to schemes such as Venture Capital Trusts and Enterprise Investment Schemes on your tax return, even if you have no other need to file your return, as HMRC won’t remind you. 

4. Check your State pension for any gaps

Your State pension entitlement is determined by the number of qualifying National Insurance (NI) years you have. People typically need at least 10 qualifying years of NI contributions to receive any State pension at all, and at least 35 years to receive the full new State pension.

Checking your tax account for any gaps in your NI record quickly identifies whether you have enough qualifying years to receive a full State pension – a valuable source of income considering the full new State pension rose by 8.5% earlier this month and is now worth £11,502 a year. 

People that might need to top up include:

• Those who took a career break
• Low earners
• Expatriates living and working abroad

Plugging any NI gaps will ensure you receive your full State pension entitlement, a vital income source in the later stages of life when you may not be fit enough to continue working or have inadequate private pension savings. 

Good to know – taxpayers can typically only backdate their NI contribution history by six years. However, the government is currently allowing people to pay for gaps on their NI record all the way back to April 2006. This unique window of opportunity closes on 5 April 2025, so it is imperative taxpayers take advantage while they can.

5. Set up regular savings into your ISA

Getting ahead with using your £20,000 ISA allowance can pay off handsomely. However, it’s always good to remember that investing carries risk – you may not get back the amount invested.

Our calculations find that someone who had consistently invested their full ISA allowance at the very start of the tax year since the inception of ISAs will be significantly better off in comparison to a saver who had waited until the final day of the tax year. This is because assets have longer to take advantage of the compounding effect.  

But of course, not everyone has a spare £20,000 to add to a Stocks & Shares ISA. No matter, you can make smaller contributions either on an ad hoc basis or through a regular monthly direct debit. Investing monthly takes advantage of pound-cost averaging.

Investors can contribute smaller amounts at regular intervals no matter what the price is at the time cushioning the effects of volatility over the short- to medium-term. 

Go deeper – Understand more about why many investors choose regular saving

Good to know – ISA rules offer greater flexibility from this tax year. Savers can now subscribe to multiple ISAs of the same type and make partial ISA transfers between different providers. But remember multiple ISAs doesn’t mean multiple allowances – you still only have one annual ISA allowance of £20,000.

6. Direct your NI tax cut into your pension and slash your income tax bill

UK workers were handed two 2% cuts to the NI headline rate of this year, which means their April wage slip may look a lot healthier. Rather than fritter the extra money you receive on everyday expenses, why not direct it towards your pension instead. The Chancellor’s 2% cut to NI takes the main rate to 8%, which means:

Earnings	Monthly NI saving	Annual NI saving
£35,400	£75	Approx. £900
Higher earner	Approx. £125	Approx. £1,500

Directing NI savings into a pension will not only boost retirement income in the future but could also slash your income tax bill. That’s because any contributions attract tax relief at your marginal rate.

With each pension contribution, basic rate taxpayers have 20% tax relief added to their pot while those on the higher 40% and 45% tax rates can respectively claim a further 20% and 25% off their tax bill for the year (different tax rates apply in Scotland). Remember, prevailing tax rates and reliefs depend on individual circumstances and may change.

NI savings contributions to a pension

Tax rate	NI savings contribution	Tax relief	Total gross pension contribution
Basic rate	£900	£225	£1,125
Higher earners	£1,500	£375	£1,875 Plus, they can claim an additional 20% tax relief of £375 through a self-assessment tax return

Good to know – the maximum you can pay into a pension this tax year is £60,000 gross or 100% of your qualifying earnings, whichever is lower, unless you are a very high earner subject to a tapered allowance. That limit encompasses all contributions across all pension arrangements, including tax relief and employer contributions. Remember, once the money is added to your pension, you cannot touch it until you are 55, or 57 from 2028.   

7. Reduce your tax liability – initiate a Bed & ISA or Bed & Pension

Sharp reductions in the annual capital gains and dividend allowances mean more investors are at risk of paying tax on their investments for the first time. Moving investments, such as shares and funds, held outside a tax-efficient account into an ISA or pension can help to avoid this happening.

A Bed & ISA or Bed & Pension allows investors to sell shares or funds – ideally, with careful use of their current exemptions – and repurchase them within their chosen tax wrapper without incurring a tax charge.

Remember to calculate your capital gain carefully before selling, so that you’re aware of any tax liability you will incur if you exceed the current £3,000 capital gains exemption.   

Many people seek to do Bed & ISA at the end of the tax year but one of the biggest pitfalls is savers running out of time to complete the process.  ISA providers will have a cut-off point for Bed & ISA transactions at tax year end to allow enough time for the process to complete. Both a Bed & ISA and Bed & Pension can take up to 10 days or longer.

The process of migrating share certificates into an investment account with the aim of selling the shares  can take up to four weeks. Those with assets ready to transfer could consider starting the process now while their tax affairs are fresh in the mind. This will eradicate any tax year end stress by ensuring people don’t miss out on their key allowances before they reset.

Go deeper – Get the truth about investment transfers. Understand what’s involved, the pitfalls to avoid, and how investors can make the transfer journey work for them.

Good to know – while you may pay capital gains tax on any profits above your annual allowance, moving the money into an ISA or SIPP means you won’t have to in the future; this will become increasingly beneficial in this high tax environment.  

8. Check your child benefit entitlement and boost your income

Checking what child benefit you are entitled to can deliver a healthy boost to household finances. The benefit can be claimed by most adults responsible for children under the age of 16, or 20 in instances where a child stays in approved full-time education or training.  

The threshold at which the High-Income Child Benefit Charge (HICBC) is applied has increased to £60,000 from £50,000 and the top of the taper at which the benefit is withdrawn completely has been extended to £80,000 from £60,000. 

This means more than 170,000 families no longer need to pay back child benefit payments and almost half a million will save £1,300 this tax year. The system is set for further reform when the benefit will be based on the overall household income rather than that of the highest earner, though this will not happen until April 2026.  

For now, parents earning between £50,000 to £60,000 can reinstate their child benefit payments. Even those earning between £60,000 to £80,000 and above should still register for child benefit even if they lose the full benefit because of the HICBC. This is because even if one partner – or both – earns too much to receive a cash payment, they are still entitled to valuable NI credits which count towards their State pension.  

Good to know – Parents receiving child benefit payments again could direct that money straight into a child’s Junior ISA to give their future a financial head start. A parent receiving the full amount of £25.60 a week for one child could tuck away more than £1,300 a year. That amount consistently invested from the child’s birth until they turn 18 could build up a pot of around £40,000 net of fees based on a 5% annual compound growth rate (this is an example to illustrate compounding and you may get back more or less than this amount).  

How Bestinvest can help investors get ahead

Visit our tax-efficient investor hub for expert insights and resources, including Grow my money, a free online investor tool that shows how investing could help you reach your financial goals.

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