Halloween: the season of ghouls, goblins, and gremlins; warlocks, witches, and wizards.
Children everywhere are preparing to dress up in their most frightening finery and fill their pumpkin-shaped buckets with sweets and chocolates. While you may have outgrown Halloween treats, that doesn’t mean you’re safe from tricks, particularly when it comes to your personal finances.
Bedsheet ghosts may not give you the same fright as they used to, but simple tax mistakes could. Here are five scary tax mistakes 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 – your total taxable income before any personal allowances and less certain tax reliefs – 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 is gone. So, the salary you earn between £100,000 and £125,140 is taxed at an effective rate of 60%.
You might be able to reduce the impact of the 60% Income Tax trap by increasing your pension contributions or making charitable donations to lower your adjusted net income.
Keep in mind that tax rules can be complex and your personal circumstances will affect your tax liability and what’s appropriate for you. Discuss your options with a financial planner.
2. Failing to claim all the pension tax relief you’re eligible for
Pensions Age (30 January 2026) reports that a scary £1 billion in pension tax relief is potentially being left unclaimed. Among those missing out are:
- 807,000 higher-rate taxpayers
- 19,000 additional-rate taxpayers.
These individuals aren’t taking full advantage of tax relief on their pension contributions. Pension tax relief at the basic rate (20%) is usually applied automatically, whereas you need to claim the higher and additional rates of Income Tax (40% and 45%, respectively) through Self Assessment.
Also remember to make full use of your Annual Allowance and available carry forward, which lets you draw on unused allowance from the past three tax years. As of the 2026/27 tax year, the Annual Allowance is £60,000.
Speak to a financial planner to make sure you are claiming all the tax relief you are entitled to.
3. Overlooking ISAs in your investment portfolio
Investing is a way to build long-term wealth that hopefully beats inflation and funds your future.
Where you put your investments matters. Stocks and Shares ISAs are free from Income Tax, Capital Gains Tax (CGT), and Dividend Tax up to the annual subscription limit of £20,000. This means more of your money ends up in your own pocket, rather than going to HMRC.
If you’re planning to treat your own little goblins and ghouls to something sweeter than chocolate this Halloween, you can also open a Junior Stocks and Shares ISA.
Each year you can contribute up to £9,000 per child, with returns also free from Income Tax, CGT, and Dividend Tax.
If you use an ISA to invest, whether for yourself or a child, keep in mind that investment returns cannot be guaranteed. You may get back less than you invested.
Discover more tax-efficient ways to support your children or grandchildren.
4. Putting off Inheritance Tax planning
Deciding how to arrange your estate among those you love can be a frightful prospect. After all, you might be more focused on building wealth for retirement, or spending it.
But forgetting to consider the impact of Inheritance 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 ones with less.
The value of your estate that exceeds the nil-rate bands will usually be liable for IHT. These are:
- Nil-rate band: £325,000
- Residence nil-rate band: £175,000, which applies to those passing on their main residence to a direct descendant.
A variety of measures, such as making lifetime gifts and setting up trusts, can be implemented to reduce the value of your estate and, in turn, its tax bill. The key is to implement these solutions early enough for them to be effective.
Again, your personal circumstances may affect your estate’s IHT liability and what your options are.
Research suggests delaying estate planning collectively costs UK families £12.3 billion. Confronting your estate’s IHT liability now could mean you aren’t spooked later on.
5. Reacting to speculation about the October Budget without consulting your financial planner
October isn’t just Halloween month – it will also include the first Budget of Andy Burnham’s premiership, which might seem scary for different reasons.
The Autumn Budget is set to take place on 28 October, three days before All Hallows’ Eve.
Nothing is set in stone yet. However, there is much speculation about what is likely to emerge, particularly around tax changes.
If you give in to this noise and make a decision about your plan without consulting a financial planner first, you could end up making a costly and irreversible mistake.
Remember to stay calm and wait for any changes to be announced before taking action. And if you are concerned, reach out to your 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 from under your bed this Halloween. But we can help you tackle the scary tax mistakes lurking in your financial plan.
Get in touch today to arrange a meeting.
Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The Financial Conduct Authority does not regulate estate planning, tax planning, or trusts.
