Financial advice for high earners: what is best practice?

Who is considered a high earner in the UK?

In the UK, a high earner is typically someone earning over £50,270 a year, as this is the point you become a higher rate taxpayer (40%).

Most people have a standard personal allowance of £12,570, the amount you can earn before paying income tax.

However, if your income exceeds £100,000, you start to lose this tax-free allowance, and by the time your income reaches £125,140, you’ll lose the entire personal allowance. 

Earn over £125,140, and you’ll enter the 45% additional income tax bracket.

To reduce the amount of tax you pay, it’s important to understand these thresholds.

What is the importance of having a financial adviser as a high earner?

For a high earner, managing your wealth can become complex, and a financial adviser can help you navigate these challenges.

Professional advice ensures you’re taking advantage of tax advice for higher earners to minimise your tax burden and optimise your wealth.

With tailored guidance, you can structure your income, investments, and pension contributions in the most tax-efficient way possible.

The emotional value of financial advice

Managing personal finances can be stressful and time consuming given the complexity and important nature of financial decisions.

Vanguard's latest 2025 study provides the below insights on how financial advice can add emotional and time saving value:

• Advised clients are less financially stressed than self-directed investors: Advised investors are roughly half as likely (14%) as self-directed ones (27%) to experience high levels of financial stress.

• Advice delivers emotional value to clients through more peace of mind: 86% of advised clients report having greater peace of mind when thinking about their finances, compared with managing them on their own. Advice improves investors’ positive emotions and seems particularly effective at lessening negative emotions regarding personal finances, such as feeling overwhelmed and worried.

• Advice saves clients time: 76% of advised clients say advice typically saves them two hours per week - including time spent thinking about money and financial admin.

What does being a higher earner mean for my taxes?

As a high earner, you face more tax obligations. If your income is between £50,271 and £125,140, you're taxed at 40% income tax; for income above £125,140, you're taxed at 45%. 

For example, someone earning £60,000 pays 40% tax on the portion above £50,270, while a basic-rate taxpayer earning £30,000 pays 20% income tax on their income over their personal allowance (£12,570).

Higher earners also start to lose their personal allowance once their income exceeds £100,000.

For every £2 earned over this threshold, you lose £1 of your personal allowance, meaning it’s fully phased out at £125,140. This creates the 60% tax trap, where your effective tax rate rises sharply for income in this range.

For example, if you earn £100,000 and receive a £10,000 pay rise, you’ll pay £6,000 more tax on your additional earnings - £4,000 income tax, and £2,000 due to losing some of your personal allowance.

One major issue for higher earners with children is the loss of financial support as your earnings rise.

If you’re responsible for a child under the age of 16 (or 20 if they are in full time education) you can claim child benefit.

But if you earn over £60,000, you’ll start paying it back through the high income child benefit charge. Once your income reaches £80,000, the benefit is wiped out entirely. 

In addition, those earning over £100,000 no longer qualify for the tax-free childcare scheme. This gives working parents a £2 top up for every £8 they pay into their childcare account.

Even earning 1p more than £100,000 means you could lose out on tax-free childcare worth £2,000 a year per child (or £4,000 if they are disabled).

A high earner with significant investments will also face additional tax implications from dividends and capital gains. The capital gains tax and dividend tax rates are significantly higher for higher-rate taxpayers.

From April 2026, dividend tax rates increased by 2% to 10.75% and 35.75% for basic and higher rate tax rates respectively. The dividend tax rate remained  unchanged for additional-rate taxpayers at 39.35%.

These taxes can significantly affect your overall tax liability, so careful planning is essential.

How can I maximise my finances as a high earner?

With the right strategies, high earners can maximise their wealth while keeping taxes in check.

Here are some options to explore for those earning more than £50,270:

Increase your pension contributions

Pension contributions are among the most effective ways to lower your tax burden as a higher earner.

This is because tax relief effectively repays the income tax payable on the money. 

As such, it only costs a higher rate taxpayer £60 to pay £40 into their pension.

So, the more you pay into your pension, the less income tax you’ll pay.

Watch out here because some pension schemes, known as ‘relief at source,’ only pay 20% tax relief automatically, and you’ll need to reclaim the extra 20% through your tax return.

This includes all personal pensions, like SIPPs and some workplace pensions. If you aren’t sure how yours works check with your employer.

You can contribute up to £60,000 each year (the pension annual allowance) or 100% of your annual earnings, whichever is lower.

If you’re earning over £100,000, putting more into your pension can help you regain part or all of your personal allowance. This not only lowers your taxable income but also boosts your pension.

Retirement planning for high earners means using your pension as the main tool to cut your tax bill now while building a bigger retirement fund later.

Because pension contributions get tax relief at your marginal rate, every pound you pay in from taxed income goes further for a higher-rate taxpayer, and topping up your pension can also help you regain some or all of your personal allowance if you earn over £100,000.

Use our private pension calculator below to find out if you're saving enough and discover ways to boost your pension pot.

Use ISAs

Another tax-efficient strategy is to maximise your annual individual savings account (ISA) allowance.

With an ISA, you can save or invest up to £20,000 a year, and any interest, dividends, or growth earned are tax-free.

However, in the 2025 Autumn Budget, it was  announced that the maximum you can pay into cash ISAs will be cut from £20,000 to £12,000 for under-65s, with the remaining £8,000 allocated for investing in stocks and shares.

Those over the age of 65 will still be able to pay the full ISA allowance of £20,000 into cash ISAs.

Here’s a summary of how much tax you could owe on assets held outside an ISA:

• Interest: Interest is currently taxed at the same rate as other earnings - 20%, 40% or 45% for basic-rate, higher-rate and additional-rate taxpayers, respectively. However, these rates will increase by 2% from April 2027. The first £1,000 and £500 of interest are tax-free for basic-rate and higher-rate taxpayers, respectively, but additional-rate taxpayers don’t have any tax-free allowance.

• Dividend income: Income over £500 taxed at 10.75%, 35.75% or 39.35% depending on whether you pay basic, higher or additional rate tax.

• Gains on shares: Higher and additional-rate taxpayers owe capital gains tax (CGT) of 24% on any gains on shares over £3,000 in one tax year. Those that normally pay basic rate tax will also pay the higher rate if their gain is sufficient to push them into the higher rate tax category.

ISAs are therefore  an excellent way for high earners to legally shelter money from tax while growing their wealth.

Charitable donations

Donating to charity is a win-win strategy for high earners and good causes. This is because charitable donations are eligible for tax relief.

The Gift Aid scheme allows charities to claim an additional 25p for every £1 you donate. Higher-rate and additional-rate taxpayers can then claim a further 20% or 25% back through their tax return or making a claim to HMRC.

This can be used to reduce your personal income tax bill.

Salary sacrifice schemes

Salary sacrifice is another tool for lowering your tax burden.

With these schemes, you agree to give up part of your salary in exchange for extra benefits including pension contributions, childcare vouchers, extra holiday or a company car.

If you’re repaying student loans, then salary sacrifice can also help you reduce your loan repayments. That’s because your repayments are based on your reduced pay, after salary sacrifice.

The reduction in salary means you pay less tax and national insurance, helping to keep more money in your pocket while enjoying additional perks.

In the 2025 Autumn Budget, it was announced that pension contributions under ‘salary sacrifice’ will be capped at £2,000 each tax year from April 2029.

Contributions of over £2,000 will still benefit from income tax relief, but won’t benefit from NI savings.

How can a high earner invest to grow their wealth?

Investing is key for high earners looking to build long-term wealth. Whether you’re interested in stocks, bonds, or property, investing provides opportunities for your money to work harder.

Some high earners also look at tax-efficient options designed for higher and additional-rate taxpayers, such as Venture Capital Trusts (VCTs) and the Enterprise Investment Scheme (EIS), which offer income tax relief but carry higher risk and won't suit everyone.

With investing, returns are not guaranteed and so your capital is at risk. But it is possible to reduce your risk with a balanced approach and a high level of diversification.

A financial adviser can help you with your investment strategy and ensure your money is invested as tax efficiently as possible.

How can high earners reduce their tax bill?

Mitigating tax for high earners is about structuring income and assets to take advantage of reliefs and allowances that reduce overall tax exposure.

This could involve spreading income across family members, reviewing your investment portfolio to ensure it's tax-efficient, and exploring government incentives.

High earners may also benefit from optimising the timing of income, such as deferring bonuses or adjusting the way that capital gains are realised to avoid crossing into higher tax brackets unnecessarily.

Strategic use of ISAs, pensions and tax reliefs is key to keeping your tax liabilities in check.

What questions should I ask a financial adviser as a high earner?

Here are some questions to ask and why they’re important:

• How can I reduce my tax liability? This will help you explore options for reducing your tax burden, like pension contributions or charitable giving.

• How can I maximise my investments? Get advice on how to structure your investment portfolio to grow wealth while considering tax implications.

• What strategies should I use to protect my wealth? Discuss risk management, including insurance and diversification strategies.

• How should I plan for retirement? Make sure your pension strategy aligns with your long-term financial goals.

• Are there any benefits I’m not taking advantage of? Salary sacrifice schemes or specific tax breaks may be available to you as a high earner.

Get expert financial advice

For high earners, managing wealth effectively involves more than just earning a high income. With complex tax implications and the potential loss of key benefits, financial planning becomes crucial. 

By working with a financial adviser, exploring tax-efficient strategies, and making smart investment decisions, high earners can reduce their tax burden and build long-term financial security.

Proactive planning is the key to turning the challenges of higher earnings into opportunities for sustained growth.

Let Unbiased match you with a qualified financial adviser who can help you maximise your income, reduce your tax burden, and grow your wealth efficiently.