How High-Earning Women Can (Legally) Reduce Their Tax Burden

That's one lengthy tax bill —HMRC strikes again!

HMRC is Watching—Let's Give Them Less to See

It all begins with that bonus month payslip, add SFE deductions and it might send you over the edge…

For women earning over £80K, tax planning isn’t just an option, it’s essential. The right strategies can help you keep more of your hard-earned income while ensuring compliance with UK tax laws. Here’s how you can optimise your financial strategy:

1. Maximise Pension Contributions

Pension contributions are among the most tax-efficient ways to reduce taxable income. You can invest up to £60K per year into your pension with immediate tax relief at your highest rate. This means a higher-rate taxpayer could save £40 in tax for every £100 contributed, building significant long-term wealth.

2. Make the Most of ISAs

Using your full £20K annual ISA allowance enables tax-free savings and investments. Although there are rumours this allowance might change, it's currently an ideal way to protect your investment returns from tax.

3. Optimise Business Expenses

If you’re self-employed or own a business, ensure you’re fully claiming allowable expenses—from professional memberships, travel costs, home-office expenses, subscriptions, to private health insurance. These legitimate expenses directly reduce your taxable income.

4. Structure Income Efficiently

If you're a company director, consider taking a salary up to your personal allowance (£12,570 for 2024/2025) and topping this up with dividends. This structure can reduce your overall tax liability, as dividends attract lower rates of income tax compared to regular income.

5. Explore Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS)

VCTs and EIS offer substantial tax relief for those willing to invest in higher-risk, early-stage companies. Both schemes offer up to 30% income tax relief upfront. For instance, a £10,000 EIS investment could immediately reduce your tax bill by £3,000.

6. Leverage Spousal Transfers

If your partner earns less, transferring assets or investments to utilise their tax-free allowance can significantly reduce your combined tax liabilities.

7. Use Capital Gains Allowances

Remember, you have a yearly tax-free Capital Gains Allowance (currently £6,000, reducing to £3,000 from 2024/25). Strategically spreading asset sales across multiple tax years can maximise tax-free gains.

8. Benefit from Salary Sacrifice Schemes

Salary sacrifice arrangements can help you fund pensions, purchase electric cars, or join cycle-to-work schemes using pre-tax salary, reducing taxable income and lowering National Insurance contributions.

9. Maximise Family Allowances and Childcare Benefits

High earners can benefit from tax-free childcare schemes, saving up to £2,000 annually per child. Additionally, using Junior ISAs for children’s savings offers tax-free growth, helping secure your family's financial future.

10. Charitable Giving

Minerva champions philanthropy, and strategic charitable donations can also help you reduce your tax bill. Gift Aid contributions offer immediate tax relief, and donating shares or property to charity can also significantly lower your tax liability.

11. Utilise Investment Losses

If you've experienced investment losses, these can be strategically offset against future gains, reducing your overall capital gains tax exposure.

The best advice is to seek financial guidance from a professional, qualified accountant and/or financial advisor. With the right steps, the soft life is just round the corner.