How to pay less tax in 2026

Ms Reeves’s Autumn Budget means UK taxes are projected to reach 38% of gross domestic product (GDP) by August 2029. While it’s important that everyone chips in by paying a fair share of tax, there are still opportunities to reduce your tax bill by making the most of the incentives on offer.

Charles Stanley isn't a tax adviser. If you need tailored support on tax planning, speak to a tax expert.

Four tips on how to pay less tax in the UK

Gifting to reduce inheritance tax

With recent changes to inheritance tax (IHT), mapping out your legacy is more important than ever. The current tax-free threshold is £325,000, or £500,000 if passing on a family home to children or grandchildren. Married couples can combine allowances, potentially raising the threshold to £1mn. Anything above this is taxed at 40%, so reducing your estate’s value could reduce the amount your loved ones pay.

Options for gifting:

• You can gift up to £3,000 annually tax free, with unused allowance carried forward for one year. Additional gifts of £250 per person are also permitted.
• Regular gifts from surplus income are allowed if they don’t affect your lifestyle.
• Larger gifts fall under the seven-year rule – survive seven years for them to be exempt. Otherwise, tax applies on a sliding scale.

Making donations through Gift Aid can also increase the value of charitable contributions and potentially reduce costs for higher‑rate taxpayers and additional‑rate taxpayers, who can reclaim extra tax relief via their tax return.

Transfer assets to a partner

If you’re married or in a civil partnership, you can transfer investments to your partner free of capital gains tax (CGT), allowing them to use their own tax-free allowance (currently £3,000). For anything over that amount, it could still be worth transferring assets if your partner pays tax at a lower marginal rate. 

For example, transferring assets from a higher-rate taxpayer to a basic-rate taxpayer can mean gains are taxed at 18% instead of 24% – saving £600 on a £10,000 profit over the annual allowance. The same applies to dividends. Currently, the tax-free dividend allowance is £500, with tax rates varying significantly between basic and higher-rate taxpayers.

Transferring income-generating investments to a lower-rate partner can reduce your tax bill. Alternatively, moving investments from general investment accounts into an ISA or pension ensures dividend income remains tax-free.

Check your tax code

If you’re employed, you’re likely to be paid income via PAYE (Pay As You Aarn). Your tax code determines how much taxable income you can receive before income tax is applied. It’s up to you to make sure you have the correct code. This is particularly important if you have recently moved jobs or if you have more than one job.

Don’t forget about your workplace pension

Take advantage of your employer’s pension contributions and aim to maximise if possible. It’s essentially free money on the table – something you don’t want to miss, especially with rising taxes putting extra pressure on our finances. Additionally, using salary sacrifice can further reduce your income tax bill and National Insurance bill, making it one of the most tax‑efficient strategies available.

If recent trends are anything to go by – tax rules can change. Some of these reliefs may not be around forever, so my advice is to take advantage of them while you still can.