Millions of individuals are set to face higher tax payments by the year 2026, but there are strategies available to reduce your tax burden. Sarah Coles, the head of personal finance at Hargreaves Lansdown, sheds light on various methods to minimize your tax liabilities.
According to Coles, taking proactive steps early on can help you navigate the upcoming tax changes and potentially mitigate the impact of the tax increases expected in 2026.
One effective way to manage tax hikes is by leveraging tax-efficient savings options like ISA accounts, where you can stash away up to £20,000 annually without incurring any tax obligations. Additionally, considering pension contributions can be advantageous, as you can invest up to £60,000 in a pension scheme during the current tax year, benefiting from tax relief based on your highest marginal rate.
Another useful tactic is exploring salary sacrifice arrangements with employers, allowing you to exchange a portion of your salary for non-monetary benefits such as pensions or childcare vouchers. This can result in reduced tax and National Insurance deductions due to the lowered gross salary.
Furthermore, transferring income-producing assets, such as shares or investment properties, between spouses or civil partners can be a tax-efficient strategy to manage your tax liabilities. Lastly, the marriage allowance permits non-taxpaying spouses to allocate £1,260 of their personal allowance to their basic rate taxpayer partner within the current tax year.
As the tax landscape evolves, being proactive and strategic about your financial planning can help you navigate the changing tax regulations and optimize your tax situation for the future.