Millions of individuals are set to face increased tax burdens in 2026, but there are strategies available to reduce your tax liability. Sarah Coles, head of personal finance at Hargreaves Lansdown, sheds light on various methods to minimize the impact of upcoming tax changes.
Coles emphasized the importance of taking proactive steps early on to mitigate the potential financial strains expected in 2026 due to frozen tax thresholds and council tax hikes. She highlighted the opportunity for individuals to navigate these tax challenges effectively.
One key aspect to consider is the freeze on the personal allowance at £12,570 until 2031, which could lead to individuals moving into higher tax brackets as their income grows. Additionally, the dividend tax rates are set to increase in April 2026, with adjustments for basic and higher rate taxpayers, along with changes to venture capital trust tax relief.
In terms of inheritance tax, the nil rate bands remain unchanged until 2031, while council tax is slated to rise in April 2026. Furthermore, adjustments to fuel duty, alcohol duty, and tobacco duty are on the horizon, affecting consumer expenses.
Coles outlined five legal methods to reduce tax bills in 2026. These include maximizing ISA saving accounts, leveraging pension contributions for tax relief, exploring salary sacrifice options, strategically managing income-producing assets between partners, and utilizing the marriage allowance for tax optimization.
As individuals prepare for the evolving tax landscape, proactive planning and leveraging available tax-saving opportunities can help navigate the impending changes effectively.