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Income planning

Making the most of your hard-earned income

Tax planning can reduce your taxable income through the use of reliefs, credits and exemptions

Income tax planning is much more than the completion of your income tax return.

By proactively putting in place tax efficiencies, you can ensure that you are paying the right amount of tax and taking full advantage of savings available to you – whether you’re looking to reduce income tax, getting the best out of your savings, managing your capital gains, making tax efficient investments or pension contributions – you’ll no doubt want to be sure that you’re taking advantage of all the tax efficiencies available with a robust income tax strategy tailored to your individual situation.

Income tax planning may involve:

Direct tax reducers for private clients
Investment reliefs for individuals
Income and distribution planning for trusts and their beneficiaries
Efficient methods of taking business income
Maximising claims for allowances for business expenditure
Ensuring appropriate claims for foreign tax credit relief are made on overseas income
Planning pension contributions

We prepare approximately 13,000 self-assessment tax returns annually and this gives us invaluable experience and the ability to carefully review each of these to identify and highlight opportunities for our clients directly.

Planning opportunities

For individuals, income tax pinch-points occur around the levels of increasing tax brackets, income thresholds for the high-income child benefit charge and restrictions to tax-free personal allowances.

By managing income levels, the impact of these pinch-points can be eased leading to lower income tax bills. Where income levels are fixed, options may be available through personal pension contributions, or charitable gifting to reduce the rates of income tax payable personally.

Marriage allowance can be claimed where a spouse has lower income and unused personal allowances. If tax has been overpaid in earlier years, overpayment relief claims can be made for up to four tax years.

Additionally, certain investments currently come with repayable tax credits provided certain conditions are met. We can provide tax advice and work closely with Francis Clark Financial Planning to assess the suitability of particular investments, aligning with the individual’s investment risk profile. An example of this may be investments within the enterprise investment scheme which can provide income tax relief of up to 30%, alongside potential capital gains tax and inheritance tax benefits. Our specialist advisers can work with you and the financial planning team to optimise the benefits of tax efficient investing to take account of your overall tax profile and objectives.

Example of tax savings

A client has a salary from their employment of £40,000 and profits from property rental of £8,000. They also receive a bonus of £20,000 in the same tax year and make capital gains of £25,000 on residential property above their allowances. They receive child benefit for two children.

Based on these circumstances, in 2024/25 their tax position is approximately as follows:

Income tax	£14,600
High income child benefit charge	£900
Capital gain tax	£6,000
Total	£21,500

On reviewing their pension arrangements, it is advised that their bonus is paid into their pension fund before the end of the tax year. The amount received net of PAYE was £12,500 and this is the net amount paid. This has the effect of reducing the income tax and eliminating the high-income child benefit charge.

Additionally, they reinvest the capital gain on the property into an EIS investment. They are able to claim an income tax credit and also defer the capital gains tax charge.

After making the pension contribution and EIS investment, their revised tax position is approximately as follows:

Income tax	£4,000
High income child benefit charge	£nil
Capital gain tax	£nil
Total	£4,000

The overall reduction in tax for the year is £17,500. The above is an example for illustrative purposes only – it may not work for everyone and individual advice should be sought.

Tax planning for trusts

Planning for trust beneficiaries looks to maximise tax repayments on income distributed and can be particularly efficient for those with minimal other levels of taxable income. Our specialist trust teams can provide advice in this area.

More about trusts

At PKF Francis Clark, we have a wealth of experience in income tax planning for individuals, businesses and trusts. We can provide tailored advice to meet our clients’ bespoke needs. We always look for opportunities to reduce the income tax burden for clients based on their personal circumstances.

Our tax team works closely with independent financial advisers in Francis Clark Financial Planning, other advisers within PKF Francis Clark and international teams across the PKF network to provide our clients with a joined up, seamless service.

Our business advisory teams can also advise on reliefs available in terms business expenditure to reduce the level of taxable profits assessable to income in any tax year.

Income tax planning includes not paying more tax that you are required to by organising your affairs appropriately, maximising reliefs that you are entitled to and pro-actively making use of tax favoured and Government approved investments. We always aim to provide our clients with a pro-active advisory service, whether we are asked to provide a review or where we are engaged to assist in the preparation of an annual tax return.