How to Make UK Tax Benefits Work for You

For many of us, taxes feel like something we just pay and forget about. But if you live and work in the UK, the tax system actually offers powerful ways to keep more of your money and grow your wealth, if you know how to use them.

Here are the key tax reliefs every UK taxpayer should understand right now.

1. Supercharge Your Pension Contributions

A pension isn’t just a retirement account, it’s one of the most tax-efficient investments you can make.

When you contribute, the government gives you a tax top-up:

• Basic-rate taxpayers (most people earning up to £50,270) get 20% tax relief automatically.

• Higher-rate taxpayers can claim back an extra 20–25% through self-assessment.

That means every £100 in your pension may cost you as little as £60–£80 from your take-home pay.

Most employers will match part of your contributions, which is effectively free money.

You also have a generous annual allowance of £60,000 (or your total earnings if lower), and you can carry forward unused allowances from the previous three tax years.

Moola tip: Contribute at least enough to secure your employer’s full match—think of it as an instant, risk-free return on your investment.

2. Max Out Your ISA Allowance (£20,000 per Year)

After pensions, ISAs (Individual Savings Accounts) are the next building block of a tax-smart portfolio.

Whether you choose a Cash ISA for savings or a Stocks & Shares ISA for investments, all the growth and income inside is completely tax-free.

This means no tax on interest, dividends, or capital gains, ever.

For the 2025/26 tax year, you can invest up to £20,000 across ISAs.

You can also use a Lifetime ISA (LISA) if you’re saving for a first home or retirement, where the government adds a 25% bonus to contributions up to £4,000 per year.

Moola tip: Automate monthly contributions. Drip-feeding investments smooths out market ups and downs and removes the stress of last-minute deposits in April.

3. Back Early-Stage Companies: SEIS & EIS

If you have extra capital and are comfortable with higher risk, the UK rewards those who support early-stage businesses through investment.

Two standout schemes are:

• Seed Enterprise Investment Scheme (SEIS): Up to 50% income tax relief on investments of up to £200,000 a year. Hold the shares for at least three years and any capital gains are tax-free.

• Enterprise Investment Scheme (EIS): 30% income tax relief on investments of up to £1 million a year, plus the ability to defer capital gains on other investments.

These schemes are designed for high-risk, high-reward opportunities, so only invest what you can afford to lose, consider diversifying across several startups and don’t expect any short-term returns.

Moola tip: SEIS and EIS can be an exciting part of your portfolio—but think of them as a spice, not the main dish.

4. Make Your Giving Go Further

Charitable donations are another way to make your money count.

Through Gift Aid, a charity can reclaim basic-rate tax on your gift, meaning every £1 you donate becomes £1.25 for the cause.

If you pay higher or additional-rate tax, you can claim back the difference on your self-assessment, reducing your own tax bill.

You can also donate shares, property, or land to charity and potentially avoid both income tax and capital gains tax.

And if you leave at least 10% of your estate to charity in your will, the inheritance tax rate on the rest of your estate may drop from 40% to 36%.

Moola tip: Keep a running record of donations—whether through apps like Moola Money or your tax return—so you don’t miss out on relief.

5. Plan Ahead for Capital Gains

Whenever you sell shares, funds, or a second property, you may face Capital Gains Tax (CGT).

For 2025/26 the annual tax-free allowance is £3,000, down sharply from previous years.

Any gains above that are taxed at 10% or 20% depending on your income (or 18%/28% on residential property).

Smart investors manage CGT proactively:

• Sell gradually to use your allowance each year.

• Reinvest within an ISA to shield future gains.

• Offset losses against gains to reduce your tax bill.

Moola tip: Even if you don’t plan to sell soon, reviewing your CGT exposure annually can save big headaches later.

6. Don’t Overlook Smaller Wins

A few lesser-known reliefs can also make a difference:

• Marriage Allowance: If one partner earns below £12,570 and the other is a basic-rate taxpayer, you can transfer part of the allowance and save up to £252 a year.

• Work-related expenses: You may be able to claim tax relief on professional subscriptions, uniforms, or certain remote working costs.

  
  

They may not grab headlines, but together these can meaningfully reduce your annual tax bill.

Bottom Line

Tax planning isn’t just for accountants or the ultra-wealthy.

By understanding pensions, ISAs, and key reliefs like SEIS/EIS and Gift Aid, you can keep more of your hard-earned income and build long-term wealth faster.

Next step with Moola Money: Our platform helps you to identify and pull these levers in the right order—so your savings and investments grow tax efficiently, year after year.