Top tax tips for the year ahead

Taxes are the government’s biggest single source of revenue. And the Autumn Budget was certainly a tax-raising one. Taxes are set to rise £26 billion, as the Chancellor seeks to balance the books and build in some fiscal headroom over the next five years.

These were the Budget headlines:

While the overall ISA allowance remains at £20,000, from April 2027, those under the age of 65 will be able to invest a maximum of £12,000 in a cash ISA. 

Dividend tax rates will increase for basic and higher rate taxpayers from April 2026 to 10.75% and 35.75% respectively. The additional rate will remain at 39.35%.

From April 2027, savings and property income tax will rise by 2%. Basic rate taxpayers will pay 22%, higher rate taxpayers will pay 42% and additional rate taxpayers will pay 47%, impacting both savers and property owners.

Those who use salary sacrifice to contribute to a pension scheme may also lose some of the benefits. From 2029, only the first £2,000 each year contributed via salary sacrifice will be exempt from national insurance (NI) both on the individual and the employer.

With widespread changes ahead, knowing what action you can or should take to lower your tax bill and protect your assets is key.

Although the Organisation for Economic Co-operation and Development predicts that UK economic growth will rise very slightly to 1.2% in 2026¹, making the most of all your allowances is likely to have the greatest impact on your personal taxation this year.

Here, we summarise what should be on your 2026 tax checklist. 

How can I pay less income tax or national insurance?

Apart from the dividend rates, taxes on income remain unchanged in 2026. Your personal allowance, which is the amount of income you can earn before you start paying income tax, is still £12,570 and the basic rate of tax is still 20%. The 40% higher rate threshold is still £50,270, and the additional rate tax threshold, at which you pay 45%, remains at £125,140.  

However, the big sting in the tail is that these bands will now remain frozen until 2031. This means many more people may find themselves pulled into a higher tax bracket. Those with income between £100,000 and £125,140 could be caught in so-called the 60% tax trap.

There are things that you can do to pay less income tax in 2026, such as paying into a pension. Or, if you move your investments or savings into a tax-efficient wrapper such as an ISA, interest and dividends are tax free. This can help reduce your overall income subject to tax.

Have any of my tax allowances changed?

Your personal savings allowance is still £1,000 for 2026/27. However, this falls to £500 for higher rate taxpayers and £0 for additional rate tax payers - another reason to keep below a tax threshold if possible.  

While the annual cash ISA allowance will reduce for most people from 2027, topping up, or even opening a stocks and shares ISA if you don’t have one, is a highly tax efficient way to save up to the full £20,000 annual allowance in 2026.

If you’re saving into a mix of cash and stocks and shares ISAs as well as savings accounts, now is a good time to review which ones are performing best for you. You still have plenty of time to make changes ahead of the end of the tax year in April.

Topping up your pensions

Paying spare money into your pension at tax year end is a tried and tested way to lower the overall tax you pay. From April 2027, it will no longer be possible to pass on any unused pension funds without paying inheritance tax (IHT), which means it may be prudent to look at other ways of passing money on tax efficiently, such as gifting.

However, pension contributions remain an extremely tax efficient from of long-term saving.

Tax relief is limited on your personal contributions is limited to the higher of 100% of your earnings in the tax year and £3,600, but that’s still a great tax incentive. The real bonus is you will receive tax relief at your highest rate of tax. When paying into a personal pension, the scheme will claim 20% tax relief on your behalf. You can then claim the extra 20% or 25% (depending on your rate of tax) from HMRC, reducing the cost of the contribution overall. 

The annual allowance covers contributions you make yourself, and any your employer or third parties make for you. This currently stands at £60,000 for most people. It may be tapered for those with income in excess of £200,000, to a low at £10,000. Restrictions will also apply when you have started drawing certain types of pension income. 

In addition, unused annual allowance can usually be carried forward for up to three years, although the tax relief on personal contributions will still be restricted by earnings in the current year.  

Will you be paying more capital gains tax (CGT) this year?

If you’re planning to sell assets this year, it’s important before you commit to make sure you know what CGT you might incur. Although the £3,000 CGT annual exempt amount did not change in the 2025 Autumn Budget, keep a close eye on your CGT liability, which is 18% for basic rate taxpayers, and 24% for higher and additional rate taxpayers. There are some exemptions such as on the sale of your main residence. 

If you are planning to sell an asset in the short term or living off the proceeds of a sale as part of your retirement income, it may be time to revisit your plans with your financial adviser. You may be able to sell an asset over several tax years or split it with your spouse or civil partner so you can use both CGT allowances.

CGT isn’t the most straightforward of taxes to get your head around, so do talk your plans and options through with your financial adviser before you sell. You don’t want to inadvertently find yourself paying more than you have to. 

Your 2026 tax checklist

• Put as much as you can into your ISAs
• Review the performance of your pensions, ISAs and other assets
• Maximise your pension contributions before tax year end
• Consider making more gifts or helping others out from your excess income
• Talk to your financial adviser about minimising any possible capital gains tax liabilities.

Tax-proofing your year

2025 was a challenging year financially for many. But we can help make sure that your finances are in a good place going into the new tax year.

If you have questions, or are reconsidering some of your financial planning, do get in touch with us.

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

An investment in equities and shares will not provide the security of capital associated with a deposit account with a bank or building society. However, please bear in mind that over the long-term inflation will erode the purchasing power of your capital.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Please note that Cash ISAs are not available through St. James's Place.

Source
¹Economic and fiscal outlook, Office for Budget Responsibility - accessed October 2025