Millions of individuals are projected to face increased tax obligations in 2026, but there are strategies available to reduce your tax burden. Sarah Coles, the head of personal finance at Hargreaves Lansdown, provides insights on navigating frozen tax thresholds and council tax hikes.
Coles emphasizes the importance of taking proactive steps early to mitigate the potential impact of upcoming tax changes in 2026. To address these challenges, she suggests exploring various tax-saving opportunities.
One key development is the freeze on the personal allowance at £12,570 until 2031, which may lead to individuals being pushed into higher tax brackets as their income rises. Additionally, the dividend tax rates are set to increase in April 2026 for both basic and higher rate taxpayers, along with adjustments to venture capital trust tax relief.
Inheritance tax thresholds will remain unchanged until 2031, while council tax is slated to rise in April 2026, allowing local authorities in England to implement up to a 5% annual increase without a referendum. Furthermore, the fuel duty cut introduced in March 2022 is expected to gradually revert to previous levels by March 2027.
Other tax changes include alcohol duty adjustments based on inflation, a one-time tobacco duty increase, and the implementation of a new duty on vaping products starting in October 2026.
Coles outlines five legal methods to reduce tax liabilities in 2026. These include maximizing ISA savings accounts, leveraging pension contributions for tax relief, utilizing salary sacrifice schemes, considering income-producing assets transfer between spouses, and taking advantage of the marriage allowance for couples where one partner is a non-taxpayer.
By adopting these strategies, individuals can navigate the evolving tax landscape and potentially minimize the impact of upcoming tax changes in 2026.
