5 methods to decrease your invoice and pay much less tax in 2026

[ad_1] How would you want to present your self a internet pay rise, by slicing your tax invoice?

Though revenue tax gained’t improve in 2026, many individuals can be paying tax at a better charge than earlier than.

That’s as a result of the revenue tax thresholds have been frozen for a number of years, whereas inflation has raised each costs and earnings fairly considerably.

Yearly, this pushes extra folks throughout the edge into a better tax band - that’s what you’ll have heard be referred to as fiscal drag.

If you happen to’re certainly one of them, you could be in search of respectable methods to scale back your tax invoice, so that you get to maintain extra of your earnings. Listed below are some to think about:

1. Pay extra into your pension

For most individuals, a pension is probably the most tax-efficient technique to construct wealth. Your contributions are restricted to 100 per cent of your annual earnings and capped on the annual allowance (for most individuals, £60,000), however for those who pay in inside these limits, tax reduction is instantly utilized at at the least the fundamental charge of 20 per cent.

Greater-rate taxpayers are eligible for tax reduction at 40 per cent, and for additional-rate taxpayers, it’s 45 per cent.

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(Getty Photos/iStockphoto) Plus, for those who earn greater than £100,000 a 12 months, paying the surplus right into a pension can cut back your adjusted internet revenue to under £100,000, that will help you keep away from private allowance tapering (often known as the 65 per cent tax entice) and entry free childcare hours, for those who want them.

2. Use your ISA allowance

Your annual ISA allowance lets you shield as much as £20,000 of financial savings and investments from tax.

If you happen to haven’t but used your full £20,000 ISA allowance for the 2025/26 tax 12 months, and you've got financial savings or investments which can be at present in a special, taxable account, then merely shifting them into an ISA may cut back your future tax payments. Bear in mind you might have to pay tax on gross sales for this tax 12 months although.

This 12 months not a lot will change however subsequent 12 months, on 6 April 2027, your ISA allowance resets, and the foundations change. Right here’s a quick overview:

Get a free fractional share price as much as £100.Capital in danger.

Phrases and circumstances apply.

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Get a free fractional share price as much as £100.Capital in danger.

Phrases and circumstances apply.

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UK adults nonetheless have the identical £20,000 annual allowance. Nonetheless, you possibly can then solely put as much as £12,000 right into a money ISA within the coming tax 12 months (until you’re over 65). The remaining £8,000 should go into a special sort of ISA, akin to a shares and shares ISA. When you have a Lifetime ISA (otherwise you’re eligible to open one), you possibly can put in as much as £4,000 of your whole £20,000 in right here. 3. Switch property to your husband, spouse or civil companion

Married {couples} and {couples} in civil partnerships can transfer cash and property between the 2 of them in tax-free transactions.

So, assuming you and your companion share your funds, it is smart for money, investments, and worthwhile possessions to be legally held by whoever can pay much less tax on the revenue or good points they generate.

For instance, dividend tax charges are very completely different for a basic-rate taxpayer (10.75 per cent from April 2026) and an additional-rate taxpayer (39.35 per cent).

If an additional-rate taxpayer owns a portfolio of shares that pays dividends of roughly £10,000 a 12 months, transferring possession to their companion, a basic-rate taxpayer, may cut back their mixed tax invoice by over £2,000.

4. Report capital losses

Every now and then, a big tax invoice may happen since you’ve bought one thing worthwhile within the tax 12 months (akin to a second residence, a portfolio of shares, a cryptocurrency holding, or an art work or vintage). You’ll be resulting from pay capital good points tax (CGT) on income above your annual exempt quantity of £3,000.

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(Getty Photos/iStockphoto) You may cut back your CGT invoice by offsetting losses you’ve made, not simply within the present 12 months however in any earlier 12 months (so long as the loss is reported inside 4 years of the 12 months it occurred, and hasn’t already been offset in opposition to a earlier acquire).

Even for those who don’t have a taxable acquire within the present 12 months, reporting any shares, crypto property, valuables, and many others. that you simply’ve bought at a loss may assist you to avoid wasting in future years.

5. Declare tax reduction on Present Support donations

Making a Present Support donation primarily advantages the charity you donate to, boosting the donation quantity by 25 per cent. Nevertheless it additionally has advantages for higher-rate and additional-rate taxpayers, who can cut back their tax invoice by reporting the donations they’ve made.

For each £100 you’ve donated, you possibly can declare £25 in tax reduction as a higher-rate taxpayer, or £31.25 as an additional-rate taxpayer.

You may declare this reduction as much as 4 years after the 12 months the donation was made, so it could be price trying again over earlier years to see what you’ve paid and the way a lot you might be resulting from get again.

Different suggestions

There are many different methods to legitimately cut back your tax invoice, however they’ll rely in your revenue, relationship standing, and targets. Listed below are a number of normal guidelines:

Ensure you’re utilizing all of your tax-free allowances, akin to the non-public financial savings allowance and dividends allowance Think about tax-efficient investments and financial savings merchandise, akin to gilts (that are free from CGT) and premium bonds (that are free from revenue tax) Declare for any allowable bills you’re entitled to via your tax return. When investing, your capital is in danger and it's possible you'll get again lower than invested. Previous efficiency doesn’t assure future outcomes.