Maximise your take-home income with these proven tax-saving techniques
Proven Tax-Saving Strategies for UK Taxpayers in 2026
Maximise your after-tax income with expert-approved techniques
Tax planning is not just for the wealthy—it’s for anyone who wants to keep more of their hard-earned money. By understanding and utilising available tax allowances, you can legally reduce your tax bill and boost your financial position. Regularly reviewing your finances throughout the year allows you to take advantage of changing tax rules and identify new opportunities to save.
Protect Your Savings and Investment Income from Tax
Understanding Your Personal Savings Allowance
Basic-rate taxpayers can earn up to £1,000 in savings interest tax-free through their personal savings allowance, while higher-rate taxpayers receive a £500 allowance . Additional-rate taxpayers receive no allowance and pay tax on all savings interest.
Important tax changes ahead:From April 2027, savings income tax rates will increase by 2 percentage points across all bands—the basic rate will rise from 20% to 22%, the higher rate from 40% to 42%, and the additional rate from 45% to 47%. If you’re approaching or exceeding your savings allowance, transfer funds into a cash ISA where all interest is completely tax-free, regardless of the amount earned.
Maximising Your Dividend Allowance
The dividend allowance for the 2025/26 tax year stands at just £500 , a significant reduction from previous years. From April 2026, dividend tax rates will increase—the ordinary rate will rise from 8.75% to 10.75%, and the upper rate from 33.75% to 35.75% . The additional rate remains at 39.35%.
Tax-saving strategy: Move dividend-producing investments into a stocks and shares ISA. Within the ISA wrapper, you pay zero tax on dividends or investment growth, regardless of the amount.
Boost Your Pension Contributions for Substantial Tax Relief
In 2025/26, you can contribute up to £60,000 into pension schemes annually and receive tax relief, or 100% of your earnings if less. This remains one of the most powerful tax-saving opportunities available.
How Pension Tax Relief Works
– Basic-rate taxpayers receive 20% tax relief automatically
– Higher-rate taxpayers can claim an additional 20% (total 40%) through Self Assessment
– Additional-rate taxpayers can claim an additional 25% (total 45%)
For example, a higher-rate taxpayer contributing £10,000 to their pension effectively costs them only £6,000 after tax relief—a £4,000 saving.
Important change: High earners with adjusted income over £260,000 face a tapered annual allowance, reducing by £1 for every £2 earned above this threshold, down to a minimum of £10,000. Carry Forward Unused Allowances. You might be able to carry over unused annual allowance from the previous three tax years, potentially allowing contributions significantly exceeding £60,000 if you haven’t fully utilised past allowances.
Leverage Tax-Efficient ISAs
For 2025/26, the adult ISA allowance remains £20,000 . All interest, dividends, and capital gains within ISAs are completely tax-free. Critical upcoming change: From April 2027, the cash ISA allowance will be restricted to £12,000 within the overall £20,000 limit for those under 65 . Those aged 65 and over can continue saving up to £20,000 in cash ISAs.
Save Tax-Efficiently for Children
For 2025/26, the Junior ISA allowance is £9,000 per child . This can be split between cash and stocks and shares Junior ISAs. Importantly, anyone can contribute to a Junior ISA without affecting their own ISA allowance.
Tax advantage: Money given to a child by parents that generates more than £100 per year in interest will be taxed at the parent’s tax rate in normal savings accounts, but Junior ISA savings remain tax-free .
Strategic Inheritance Tax Planning
The standard Inheritance Tax (IHT) rate is 40%, charged on estates exceeding £325,000 . Without proper planning, significant wealth can be lost to tax.
Annual Gift Exemptions
You can give away £3,000 per tax year without it counting toward your estate, and this can be carried forward one year if unused . This means couples could potentially gift £12,000 in one year using both current and previous years’ allowances. You can also give unlimited £250 gifts to as many people as you want, provided you haven’t used another allowance on the same person .
The Seven-Year Rule
No tax is due on gifts of any amount if you survive seven years after making them . These are called Potentially Exempt Transfers (PETs). If you die within seven years, taper relief reduces the tax charged on gifts made between 3-7 years before death . Gifts made within three years are taxed at the full 40% rate.
Wedding Gifts
Parents can give up to £5,000 as a wedding gift, grandparents up to £2,500, and other family members up to £1,000, all tax-free . These can be combined with your annual exemption.
Regular Gifts from Income
Gifts made regularly from surplus income that don’t affect your standard of living are exempt from IHT, with no upper limit . This could include regular contributions to children’s savings or paying life insurance premiums for family members.
Major upcoming change: From 6 April 2026, Business Property Relief and Agricultural Property Relief will be limited to the first £2.5 million of qualifying assets, with relief restricted to 50% on amounts exceeding this cap .These allowances can be passed between spouses however, meaning a married couple have a combined business relief allowance of £5m
Maximise Business Equipment Relief
If you’re self-employed or run a business, claim tax relief on all qualifying equipment purchases. This includes machinery, computers, business vehicles like vans, and office equipment. These deductions reduce your taxable profits, lowering your overall tax bill.
Plan for Upcoming Tax Changes
Several significant tax changes are on the horizon that require advance planning:
– April 2026: Dividend tax rates increase by 2 percentage points
– April 2027: Savings and property income tax rates increase by 2 percentage points
– April 2027: Cash ISA allowances restricted to £12,000 for under-65s
– April 2027: Pensions will no longer be exempt from inheritance tax , fundamentally changing estate planning strategies
Take Action Now
Tax planning is most effective when done proactively rather than reactively. Review your financial
situation regularly throughout the year, not just at year-end. Consider:
1. Maximising ISA contributions before the tax year ends on 5 April
2. Making pension contributions to utilise your annual allowance and unused carry forward
3. Strategic gifting to reduce your estate for IHT purposes
4.Transferring savings into tax-efficient wrappers before rate increases
Note:
For complex situations or substantial assets, consulting with a qualified financial adviser or tax specialist can help you navigate the rules and identify opportunities specific to your circumstances. The investment in professional advice often pays for itself many times over through the tax savings achieved.Tax rules and allowances can change, so staying informed about updates is essential for effective tax planning. Always verify current rates and allowances, as they may differ from those outlined here.