In 2026, a significant number of individuals will face increased tax burdens, but there are strategies available to reduce your tax liability.
Sarah Coles, the head of personal finance at Hargreaves Lansdown, highlights various methods to navigate through the upcoming tax changes.
One positive aspect is that proactive measures can help mitigate the impact of the looming tax adjustments in 2026.
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The personal allowance, set at £12,570 until 2031, remains stagnant, potentially pushing individuals into higher tax brackets as their income rises.
Come April 2026, the dividend tax rate will increase for basic and higher rate taxpayers, along with a reduction in tax relief for venture capital trusts.
Inheritance tax thresholds and annual gift allowances will stay fixed until 2031, while council tax in England may surge by up to 5% annually starting April 2026.
The temporary 5p per litre fuel duty reduction introduced in March 2022 will gradually revert to standard levels by March 2027.
Alcohol duty will rise in line with RPI inflation from February 2026, accompanied by a one-off tobacco duty increase as per the 2024 spring Budget announcement.
Effective October 2026, a new duty of £2.20 per 10ml of vaping liquid will be imposed.
To reduce your tax bill legally in 2026, Sarah Coles recommends leveraging ISA saving accounts, maximizing pension contributions for tax relief, exploring salary sacrifice schemes, transferring income-producing assets between spouses, and utilizing the marriage allowance for tax-efficient income splitting.
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