This is more important than ever as Chancellor Jeremy Hunt has frozen basic and higher income tax thresholds until 2028 and cut the additional rate 45 percent income tax band from £150,000 to £125,140.
Hunt also froze inheritance tax (IHT) nil-rate bands until 2028 and is slashing both capital gains tax (CGT) and dividend allowance limits from April 6.
With taxes at the highest since the war, the following checklist could help you fight back.
A record 5.5 million Britons will pay 40 percent income tax this year, as rising pay tips them over the frozen threshold.
Salary sacrifice could help some workers drop down an income tax band, said Alice Haine, personal finance analyst at Bestinvest. “Ask your employer if it will reduce your salary or any bonus payments and pay the money as increased pension contributions instead.”
Both you and your employer will also pay less National Insurance as a result, plus it boosts your pension pot, Haine added.
Agreeing to a lower salary can lower your ability to access credit, such as a mortgage, and reduce employee benefits such as life cover, and holiday, sickness and maternity pay.
The annual tax-free Isa allowance has been frozen at £20,000 since April 2017 but is still very generous.
You can invest either in cash or stocks and shares and take all of your returns free of income tax and CGT for life.
Haine said Isas are issued on a “use it or lose it” basis, so unless you act by midnight on April 5, you have lost this year’s allowance for good (but get another one next day).
Virgin Money has a best buy easy access cash Isa paying three percent, while Close Brothers pays a fixed 4.20 percent a year for five years.
A stocks and shares Isa is riskier but should deliver superior returns over the longer run, Haine said.
Do not forget the £9,000 Junior Isa either, she added.
Hunt has halved the dividend allowance from £2,000 to £1,000 from April 6. It will be cut again to just £500 in 2024.
Dividend income from shares above that is taxed at 8.75 percent, 33.75 percent or 39.35 percent, depending on your tax bracket.
If you are married and your partner pays a lower rate of income tax you could shift the shares into their name to reduce the bill, with no tax on “interspousal transfers”.
You could switch the shares into a tax-free Isa but will have to sell them first, which could trigger a CGT charge.
Yet now may be a good time to act as CGT is under attack, too.
From April 6, the CGT allowance is slashed from £12,300 to just £6,000, then to just £3,000 in 2024.
This is a blow if you have profits from an asset such as a second home or investment property, a business, antiques or jewellery, or shares held outside of an Isa.
It could make sense to sell before April 5 to benefit from today’s higher allowance.
Married couples and civil partners can pass assets between each other free of tax, and should use both CGT exemptions if they can.
READ MORE: BoE just scuppered hopes of Jeremy Hunt cutting taxes
Britons can reduce their IHT exposure by making gifts to loved ones before April 5.
Every adult can gift a maximum £3,000 a year IHT-free, so couples could gift £6,000 by April 5. You can mop up unused allowance from last year, too.
You can make further IHT-free gifts of up to £250 per person, as well as £5,000 to a child on marriage, or £2,500 to a grandchild or great-grandchild who is getting married, and £1,000 to a relative or friend.
Further gifts are known as “potentially exempt transfers” and only fully IHT-free if you live seven more years.
Savers should consider topping up their pension by year end to claim valuable tax relief.
Each £100 contribution only costs a basic rate taxpayer £80, or £60 for a higher rate taxpayer.
This benefit may be cut in future so use it now, said Andrew Tully, technical director at Canada Life. “It may also help offset Hunt’s income tax freeze.”
Contributions are limited to your annual salary, capped at £40,000, known as the annual allowance. “You can carry forward unused annual allowance from the previous three tax years,” Tully added.
You can also pay up to £2,880 into a pension for a partner or child who does not pay tax, which the government tops up to £3,600, worth £720.
The marriage allowance can save couples £252 if one partner earns less than the personal allowance and the other is a basic rate taxpayer. Claims can be backdated up to four years, giving a potential £1,242 total saving.
Higher rate tax payers who make charitable donations via Gift Aid can also claim back 20 percent tax relief via their tax return, said Emma-Lou Montgomery, associate director at Fidelity International. “Donate before April 5 to claim tax relief for the current financial year.”
