Let’s be honest — staying on top of your tax situation is about as exciting as reading the terms and conditions on a parking meter. But not staying on top of it? That’s how wealth starts quietly slipping through the cracks.
And here’s the kicker: most of it happens without you even noticing.
That’s because some taxes are upfront and in-your-face — like Income Tax — while others are like financial ninjas. They sneak in, take a slice of your hard-earned money, and vanish without so much as a thank-you note.
So today, I want to show you the 5 sneakiest tax drains I see time and time again. More importantly, I’ll show you how to plug them, so your wealth is working harder for you, not for HMRC.
1. Dividends- the “Wait, what?” Tax
You’d think building a nice little investment portfolio would earn you a high five. But no — HMRC sees dividend income, rubs its hands, and pings you with tax.
Even basic-rate taxpayers now face tax on dividends above a measly £500 (as of 2024/25). And if you’re in the higher or additional rate brackets? Ouch.
🛠️ How to plug it:
Use ISAs first and foremost to shelter dividend-paying assets and then other tax wrappers such as pensions, offshore bonds .
2. Capital Gains Tax (CGT) — The Silent Sniper
Sell a second property? Make a smart investment move? Congrats — you just triggered CGT.
The annual CGT allowance has been slashed in recent years — now just £3,000. Which means more of your gains are taxable, even if the profits don’t feel life-changing.
🛠️ How to plug it:
Use your CGT allowance every year — even if it means selling and rebuying in a smarter way. Married? Spread gains across both of you. Timing matters too — especially around tax year-end. Consider also low-coupon gilt investments (no CGT), and of course ISAs, pensions and offshore bonds.
3. Frozen Allowances — The Stealthiest of All
Here’s one most people don’t even notice. Your personal tax allowances and bands are frozen — until 2028. But inflation isn’t. So if your income goes up with cost-of-living raises, you quietly creep into higher tax brackets.
It’s like a slow drip from your bank account… only HMRC’s holding the bucket.
🛠️ How to plug it:
Pension contributions and salary sacrifice schemes can bring your taxable income down — and keep more money in your pocket.
4. Personal Allowance Tapering — The 60% Tax Zone
Earn over £100,000? Congrats — but here’s the kicker: your personal allowance starts vanishing. For every £2 you earn above £100K, you lose £1 of your allowance. That effectively puts you in a 60% tax bracket for part of your income.
Yes, really. Sixty. Percent.
🛠️ How to plug it:
Again, pension contributions can be your best friend here. Bringing your income below that £100K threshold can restore your allowance and reduce your overall tax bill. Magic.
5. Inheritance Tax (IHT) Traps — A Gift That Keeps on Taking
Most people assume IHT is for the super-wealthy. But between rising property prices and investment portfolios, plenty of families are quietly drifting into taxable estates.
And since the nil-rate band has been frozen since 2009, more estates are falling into the trap.
🛠️ How to plug it:
Use annual gift allowances. Look at whole of life insurance. Explore lifetime gifting and trusts. Get serious about estate planning before it’s too late — your future self (and your family) will thank you.
So… What’s Dripping Out of Your Wealth Bucket?
If your income’s in six figures, your portfolio’s looking healthy, and you’ve got kids, property, or a business in the mix — chances are, a few of these tax drains are quietly working against you.
The good news? You don’t have to plug them alone.
If you’re ready to stop the silent wealth leaks and start making your money work smarter (and harder), get in touch.
Let’s plug those leaks before they become floods.
• This blog is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
• The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
• The favourable tax treatment of ISAS may be subject to changes in legislation in the future
– The value of pensions and any income from them can fall as well as rise. You may not get back the full amount invested.