Millions of individuals are set to face increased tax burdens in 2026, but there are strategies available to minimize your tax liability.
Sarah Coles, the head of personal finance at Hargreaves Lansdown, highlights various factors contributing to higher taxes, such as frozen tax thresholds and council tax escalations.
Coles emphasizes the importance of early planning to mitigate the potential tax implications in 2026.
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Key tax updates include the freeze of the personal allowance at £12,570 until 2031, potentially pushing individuals into higher tax brackets as their income rises.
Starting April 2026, the dividend tax rates will increase for both basic and higher rate taxpayers, along with a reduction in tax relief for venture capital trusts.
Inheritance tax thresholds and annual gift allowances will remain stagnant until 2031, while council tax is expected to surge by up to 5% in April 2026.
The government plans to gradually revert fuel duty rates to pre-March 2022 levels by March 2027, starting from September 2026.
Alcohol duty will be adjusted based on RPI inflation from February 2026, and tobacco duty will experience a one-time increase following announcements from the 2024 spring Budget.
A new duty of £2.20 per 10ml of vaping liquid will be implemented starting October 2026.
Coles outlines five legal methods to reduce tax burdens in 2026, including maximizing ISA savings, utilizing pension contributions for tax relief, and taking advantage of salary sacrifice schemes.
Moreover, assets generating income can be transferred between spouses without tax implications, and the marriage allowance allows non-taxpaying spouses to transfer a portion of their personal allowance to their partner.
By adopting these strategies, individuals can proactively manage their tax liabilities amidst the upcoming changes.