Millions of individuals are set to face higher tax payments in 2026, but there are strategies available to reduce your tax burden. Sarah Coles, the head of personal finance at Hargreaves Lansdown, provides insights on navigating upcoming tax changes.
Coles emphasizes the importance of early planning to mitigate the impact of tax increases anticipated in 2026. She highlights that taking proactive steps can help individuals avoid the potential tax challenges on the horizon.
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Key changes affecting taxpayers include the freezing of the personal allowance at £12,570 until 2031, which may lead to individuals entering higher tax brackets as their income grows. Furthermore, the dividend tax rates are set to rise in April 2026 for both basic and higher rate taxpayers, along with reductions in tax relief for venture capital trusts.
Inheritance tax thresholds and annual gift allowances will remain static until 2031, while council tax is expected to increase in April 2026. The gradual phasing out of the fuel duty cut introduced in March 2022 will commence in September 2026, returning to pre-cut levels by March 2027.
Alcohol duty will be adjusted for inflation from February 2026, and tobacco duty will see a one-time increase as previously announced. Additionally, a new duty will be imposed on vaping products starting October 2026.
Coles outlines five legitimate methods to lessen your tax liability in 2026. These include maximizing ISA savings, utilizing pension contributions for tax relief, engaging in salary sacrifice schemes, transferring income-generating assets between spouses, and utilizing the marriage allowance for couples with differing tax statuses.