Most underused tax reliefs

The most underused relief I see is pension tax relief, especially for higher earners. Many people contribute to a pension but do not understand the extra higher-rate relief they may need to claim, or the power of carry forward when they have unused annual allowance.

Gift Aid is another one. Higher-rate taxpayers often donate to charity but forget they can claim additional relief, so the charity benefits but they miss their own tax reclaim.

For couples, Marriage Allowance is small but often ignored. It can save up to £252 a year where one spouse or civil partner has unused personal allowance and the other is a basic-rate taxpayer.

For business owners, the missed opportunity is usually boring but valuable: mileage, legitimate business expenses, pension contributions through the right structure and using allowances before they disappear. The issue is not always complexity. Sometimes people just do not review their tax position until it is too late.

The most underused tax reliefs stem from businesses and couples failing to treat financial planning as a joint, interconnected strategy.

For Business Owners
Many SME owners still pay for life insurance out of taxed personal income. Utilising Relevant Life Policies allows the business to pay the premiums as a tax-deductible expense, bypassing both income tax and National Insurance. Similarly, owners routinely overlook pension carry-forward allowances from the past three years. Large, direct company pension contributions efficiently reduce Corporation Tax while extracting profit cleanly.

For Couples
The biggest mistake couples make is letting one partner drift into higher tax bands while the other's allowances sit vacant. High-impact, neglected strategies include:
Equalising Allowances: Funding a non-earning spouse’s pension (£3,600 gross) and maximising both £20,000 ISA limits.
Asset Gifting: Transferring investments to a spouse prior to a sale to utilise two sets of CGT allowances.

a vastly underused method of moving money out of an Estate is regular gifts out of income, so long as the gift is made out of money that is not required to live on, and is seen to be regular, there is no limit as to what can be passed on

Gifts from Surplus Income is the most underused relief I see. Unlike the £3,000 annual exemption, there's no cap — wealthier families can give away tens of thousands each year with no inheritance tax and no seven-year wait. Long-term savings can reach hundreds of thousands.

Pension carry forward is another gem. Business owners can combine three years of unused allowances into one contribution — potentially over £200,000 — with income tax relief slashing the real cost.
Backdating Marriage Allowance four years produces a refund of over £1,000 from a five-minute application. Most eligible couples have never claimed it.

The £100,000 trap is the most expensive blind spot. Earnings between £100,000 and £125,140 face a 60% effective tax rate. Pension contributions fix it — every £100 paid in can cost as little as £40.

The most overlooked? Employers must legally fund eye tests and basic glasses for screen workers. Most employees and bosses are completely unaware.

“One of the most underused tax reliefs is pension planning around the £100,000 income level.”
“In the UK, income above £100,000 triggers the loss of the personal allowance, creating an effective 60% tax rate up to £125,140 — even higher when National Insurance is considered. Many higher earners aren’t fully aware of this ‘tax trap’.

For example, a £20,112 pension contribution can be grossed up to £25,140, with £5,028 added via basic rate relief and a further £5,028 reclaimed through higher-rate relief. This can also restore the £12,570 personal allowance, reducing exposure to that 60% band.

It’s a powerful but often overlooked area of tax efficiency.”