UK Tax Saving Tips for 2026/27: Legal Ways to Pay Less Tax

The most effective legal ways to cut your UK tax bill in 2026/27 are to use your allowances before 5 April, pay into a pension, claim every business expense you are entitled to, and choose the right structure for your income. None of this is aggressive. These are standard reliefs that HMRC expects you to use.

This guide sets out 15 practical ideas for employees, sole traders, landlords and company directors, with the 2026/27 numbers. For tailored advice, you can book a free call with one of our London accountants.

2026/27 allowances at a glance

1. Pay into a pension

Pension contributions receive tax relief at your highest rate. A higher-rate taxpayer who pays £8,000 into a personal pension gets relief that brings the net cost down to £4,800. Contributions can also pull your income below £100,000, which restores the personal allowance, or below £60,000 for Child Benefit purposes. Company directors can pay employer contributions, which are generally deductible for Corporation Tax.

2. Use your ISA allowance

You can put up to £20,000 a year into ISAs and pay no tax on interest, dividends or gains. The allowance is use-it-or-lose-it, so check it before 5 April.

3. Claim every allowable expense

Self-employed people can deduct costs wholly and exclusively for the business: software, equipment, insurance, professional fees, travel, a share of home costs and training. Our guide to allowable expenses lists them. If your costs are small, the £1,000 trading allowance may be simpler.

4. Choose between salary and dividends carefully

If you run a company, the mix of salary and dividends changes your tax. Dividend tax rose to 10.75% and 35.75% in April 2026, so the old rules of thumb no longer hold. Use our salary and dividend calculator and read how to pay yourself from a limited company.

5. Consider whether a company really saves tax

On 2026/27 rates, a sole trader who takes all profit out often keeps more than a limited company. A company helps mainly if you leave profit in it, want limited liability or clients require one. See our sole trader or limited company comparison.

6. Transfer the Marriage Allowance

If one spouse earns less than the personal allowance and the other is a basic rate taxpayer, the lower earner can transfer £1,260 of allowance, worth up to £252 a year.

7. Watch the £100,000 and £60,000 thresholds

Between £100,000 and £125,140 you lose £1 of personal allowance for every £2 of income, creating an effective 60% rate. Pension contributions or Gift Aid can reduce adjusted income. The High Income Child Benefit Charge starts at £60,000 and removes the benefit entirely by £80,000.

8. Claim capital allowances

Businesses can claim the Annual Investment Allowance on up to £1 million of qualifying equipment, and companies can claim 100% full expensing on most new main-rate plant and machinery.

9. Use mileage rates properly

Business mileage in your own vehicle can be claimed at 45p a mile for the first 10,000 miles and 25p after. In London, Congestion Charge and ULEZ costs on business journeys can usually be claimed too, but fines cannot.

10. Make the most of the capital gains allowance

Gains up to £3,000 are tax free each year. Selling investments across two tax years, or transferring assets to a spouse before selling, can use two allowances. Gains above the allowance are taxed at 18% or 24%.

11. Keep your landlord records tidy

Landlords can claim agent fees, repairs and insurance, and receive a 20% tax credit on mortgage interest. Missing costs is one of the most common reasons landlords overpay. See our landlord tax guide.

12. Gift Aid and charitable giving

Donations under Gift Aid let higher-rate taxpayers claim back the difference between 20% and their rate, and can reduce adjusted income for the £100,000 threshold.

13. Use the Employment Allowance if you employ staff

Eligible employers can reduce employer National Insurance by up to £10,500 a year. A company with a single director as the only employee cannot claim it.

14. Reclaim VAT where you can

VAT-registered businesses can reclaim VAT on business purchases with valid invoices. Compare the standard scheme with the Flat Rate Scheme before you join one. Our VAT guide explains how.

15. File on time and keep records

Penalties and interest are the most avoidable tax cost. A late Self Assessment return costs £100 straight away, rising to £900 after three months, before interest.

Tax saving for London residents and businesses

London freelancers and directors often have higher incomes, higher rents and more commuting than the national average, which makes the £100,000 threshold, pension planning and expense claims especially relevant. We work with clients in every borough, from self-employed people in Hackney to company directors in Croydon.

A worked example: three people, three plans

The same tax rules can lead to very different actions depending on your position. Here are three simple scenarios for 2026/27.

Your tax year-end checklist before 5 April

• Top up pension contributions.
• Use the £20,000 ISA allowance.
• Check your capital gains position and use the £3,000 exemption.
• Pay any bonus or dividend in the most efficient tax year.
• Claim outstanding expenses and capital allowances.
• Check whether Marriage Allowance or Gift Aid applies.
• Gather records for your Self Assessment return.

Common tax saving mistakes

The most common mistake is doing nothing until January. By then, the tax year has closed and most reliefs can no longer be used. The second is chasing complicated schemes that promise large savings. HMRC publishes warnings about avoidance schemes and can pursue users for the tax plus penalties. Stick to the straightforward reliefs above, keep good records and ask a regulated accountant before you commit to anything unusual.

Frequently asked questions

What is the easiest way to reduce my tax bill legally?

Paying into a pension and using your ISA and other allowances before 5 April are the simplest steps for most people.

Can I reduce my tax by running a limited company?

Not always. On 2026/27 rates a sole trader who takes all profit out often keeps more, so run the numbers first.

When is the deadline to use my allowances?

The tax year ends on 5 April, and unused ISA and capital gains allowances do not carry forward.

Is tax planning legal?

Yes. Using reliefs and allowances Parliament has provided is legal tax planning. Artificial avoidance schemes are different and carry serious risks.

Should I speak to an accountant?

If your income comes from several sources, a short planning session usually pays for itself. Our planning sessions start at £125 + VAT.