As the calendar year closes, the strain on finances for many individuals and businesses has not entirely abated. Higher tax bills and continuing high interest rates and inflation have become a fact of life. Even those with money to set aside in savings have found their higher returns courtesy of increased interest rates affected by tax changes.

For example, the National Savings & Investments (NS&I) one-year savings bond currently offers a fixed rate of 6.2%, the highest rate on offer since the bond’s launch. However, higher rate taxpayers will use up their £500 savings allowance if they invest more than £8,000 in this bond. A £25,000 investment could leave them with over £1,000 of taxable savings income. This is a significant change from ten years ago, when higher rate taxpayers could invest up to £100,000 before incurring any tax liability. There are other options for tax-efficient investing that may be a better use of available funds.

Inheritance tax (IHT) is another area where taxpayers are facing challenges. Higher property values and a frozen IHT nil rate band are pushing more estates into the IHT net. Even though property prices have fallen recently, the average price of a detached house is still over £450,000. Meanwhile, the IHT nil rate band has been frozen at £325,000 since 2009, despite a significant increase in average property prices. With the complexities of submitting estates for probate, increasing numbers are also incurring penalties, adding to the pressures.

Business owners will also need to consider tax efficiency when deciding whether to pay themselves a bonus or a dividend this year. Tax and pension changes have altered the calculation from last year.

Meanwhile newer developments bring their own taxing concerns. Clean air initiatives involving car charges have been in the headlines, but less so the tax implications. For business journeys, these additional tax charges are largely tax-deductible. On the other hand, social media influencers are becoming increasingly popular, but may not be aware that their earnings may be taxable. Understanding your position before embarking on a potentially lucrative influencer career should mean you avoid HMRC scrutiny.

Find out more about these and other stories in our latest December newsletter.