5 frightful tax mistakes you should be mindful of this Halloween

Halloween: the season of ghouls, goblins, and gremlins;warlocks, witches, and wizards.

Children everywhere are preparing to dress upin their most frightening finery and fill their pumpkin-shaped buckets withsweets and chocolates. While you may have outgrown Halloween treats, that doesn’tmean you’re safe from tricks, particularly when it comes to your personalfinances.

Bedsheet ghosts may not give you the samefright as they used to, but simple tax mistakes could. Here are five scary taxmistakes you should watch out for this spooky season.

1. Exceeding the 60% tax trap threshold

If you are a higher earner with a salary over£100,000, you could be vulnerable to the treacherous 60% tax trap.

For every £2 of adjusted net income – yourtotal taxable income before any personal allowances and less certain taxreliefs – you earn above this limit, your Personal Allowance reduces by £1.This means that by the time you reach £125,140, your entire Personal Allowance isgone. So, the salary you earn between £100,000 and £125,140 istaxed at an effective rate of 60%.

You might be able to reduce the impact of the60% Income Tax trap by increasing your pension contributions or makingcharitable donations to lower your adjusted net income. Discuss your optionswith a financial planner.

2. Failing to claim all the pension tax relief you’reeligible for

Pensions Age (30 January 2026) reports that a scary £1 billion in pension tax relief ispotentially being left unclaimed. Among those missing out are:

·  807,000 higher-ratetaxpayers

·  19,000 additional-ratetaxpayers.

These individuals aren’t taking full advantageof tax relief on their pension contributions. Pension tax relief at the basicrate (20%) is usually applied automatically, whereas you need to claim thehigher and additional rates of Income Tax (40% and 45%, respectively) throughSelf Assessment.

Also remember to make full use of your AnnualAllowance and available carry forward, which lets you draw on unused allowancefrom the past three tax years. As of the 2026/27 tax year, the Annual Allowanceis £60,000.

Speak to a financial planner to make sure youare claiming all the tax relief you are entitled to.

3. Overlooking ISAs in your investment portfolio

Investing is a way to build long-term wealththat hopefully beats inflation and funds your future.

Where you put your investments matters. Stocksand Shares ISAs are free from Income Tax, Capital Gains Tax (CGT), and DividendTax up to the annual subscription limit of £20,000. This means more ofyour money ends up in your own pocket, rather than going to HMRC.

If you’re planning to treat your own littlegoblins and ghouls to something sweeter than chocolate this Halloween, you canalso open a Junior Stocks and Shares ISA.

Each year you can contribute up to £9,000 perchild, with returns also free from Income Tax, CGT, and Dividend Tax.

4. Putting off Inheritance Tax planning

Deciding how to arrange your estate amongthose you love can be a frightful prospect. After all, you might be morefocused on building wealth for retirement, or spending it.

But forgetting to consider the impact ofInheritance Tax (IHT) until it’s too late could be an even scarier prospect,saddling your estate with a large tax bill that could leave your loved oneswith less.

The value of your estate that exceeds thenil-rate bands will usually be liable for IHT. These are:

·  Nil-rateband: £325,000

·  Residencenil-rate band: £175,000, which appliesto those passing on their main residence to a direct descendant.

A variety of measures, such as making lifetimegifts and setting up trusts, can be implemented to reduce the value of yourestate and, in turn, its tax bill. The key is to implement these solutionsearly enough for them to be effective.

Confront your estate’s IHT liability now, soyou aren’t spooked later on.

5. Reacting to speculation about the OctoberBudget without consulting your financial planner

October isn’t just Halloween month – it will alsoinclude the first Budget of Andy Burnham’s premiership, which might seem scaryfor different reasons.

The Autumn Budget is set to take place on 28October, three days before All Hallows’ Eve.

Nothing is set in stone yet. However, there ismuch speculation about what is likely to emerge, particularly around taxchanges.

If you give in to this noise and make adecision about your plan without consulting a financial planner first, youcould end up making a costly and irreversible mistake.

Remember to stay calm and wait for any changesto be announced before taking action. And if you are concerned, reach out toyour financial planner, who can help you stay focused on the long term.

We can help you exorcise your tax mistakes

We can’t help you banish the monsters fromunder your bed this Halloween. But we can help you tackle the scary taxmistakes lurking in your financial plan.

Get in touch today to arrange a meeting.

Please note: This article is for generalinformation only and does not constitute advice. The information is aimed atindividuals only.

All information is correct at the time ofwriting and is subject to change in the future.

Please do not act based on anythingyou might read in this article. All contents are based on our understanding ofHMRC legislation, which is subject to change.

A pension is a long-term investmentnot normally accessible until 55 (57 from April 2028). The fund value mayfluctuate and can go down, which would have an impact on the level of pensionbenefits available.

The tax implications of pensionwithdrawals will be based on your individual circumstances. Thresholds,percentage rates, and tax legislation may change in subsequent Finance Acts.

The value of your investments (andany income from them) can go down as well as up and you may not get back thefull amount you invested. Past performance is not a reliable indicator offuture performance.

Investments should be considered overthe longer term and should fit in with your overall attitude to risk andfinancial circumstances.

The Financial Conduct Authority doesnot regulate estate planning, tax planning, or trusts.

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