With tax allowances tightening and legislation continuing to evolve, taking a proactive approach to tax planning has never been more important. Although no individual or business can mitigate tax entirely, strategic planning can help ensure you are making full use of the allowances and reliefs available under HMRC guidelines.
Whether you are a company director or self-employed individual, reviewing your finances regularly can help ensure you are not paying more tax than necessary.
In this article, we outline several practical tax-saving tips to consider for the 2026/27 tax year, helping you stay organised, compliant and financially efficient.
1. Make full use of your personal allowances.
One of the simplest ways to mitigate your tax bill is by ensuring you are making full use of the tax allowances available to you each year.
Individuals who earn less than £100,000 per year are eligible for the personal allowance, meaning the first £12,570 of their annual income is tax-free. However, many individuals overlook additional allowances that may also help reduce their overall tax liability, including:
- Dividend allowance (£500 for 2025/26).
- Capital Gains Tax annual exemption (£3,000).
- Marriage allowance, which allows eligible couples to transfer part of their personal allowance to the other individual.
- Personal savings allowance, which allows individuals to earn a certain amount of interest tax-free, depending on their tax band (e.g. basic rate taxpayers can earn up to £1,000 in interest tax-free while higher rate taxpayers can earn up to £500).
Allowances generally reset each tax year, meaning unused allowances cannot typically be carried forward to the following tax year. Reviewing your tax position before the end of the tax year (5 April) can help ensure you are utilising the allowances available to you.
2. Review the balance between salary and dividends.
For many company directors and owner-managed businesses, income is often taken as a combination of salary and dividends. Finding the right balance between these two sources of income can help ensure you make the most of available personal allowances, National Insurance thresholds, and dividend tax bands:
- Personal allowance: Most individuals can earn up to £12,570 per year before paying income tax. Many directors choose to take a salary close to this amount to fully utilise this allowance.
- National Insurance: Salary is subject to National Insurance, with employee contributions generally charged at 8% on earnings between £12,570 and £50,270, and 2% above this. However, dividends are not subject to National Insurance, which is one of the key reasons why taking a portion of income as dividends can be more tax efficient.
- Dividend tax: For 2026/27, the first £500 of dividend income is tax-free. Dividends above this allowance are taxed at lower rates than salary (basic rate has risen to 10.75% and the higher rate to 35.75%) making them a tax-efficient way to take income.
This makes reviewing your salary and dividend strategy essential to ensure any income sources remain tax efficient.
Our expert accountants can review your salary and dividend strategy to help ensure your income is structured efficiently and fully compliant with HMRC rules, helping to potentially reduce your overall tax liability while ensuring you maximise your available allowances.
3. Maximise pension contributions.
Pension contributions can be a highly effective way to reduce your taxable income while saving for your future.
You are able to contribute up to £60,000 per year into a pension, which is known as the annual allowance. This limit applies to all pension contributions, including your own, your employer’s contributions and the basic rate tax relief the government contributes automatically.
However, if you contribute more than £60,000 into your pension you will not receive tax relief on any amount over the contribution limit. It may be possible to bring forward unutilised pension allowances from the three previous tax years.
Pension contributions can provide several tax advantages, including:
- Tax relief on contributions.
- Potential reductions in taxable income.
- Tax-efficient long-term savings for retirement.
For company directors, employer pension contributions made through a limited company may also be treated as a business expense, which may reduce corporation tax.
As pension rules can be complex, professional advice is recommended to ensure contributions remain compliant with HMRC guidelines.
4. Plan in advance for Capital Gains Tax (CGT).
Capital Gains Tax (CGT) may apply when you sell or dispose of certain assets and make a profit, such as shares, investments, or property that is not your main residence. CGT is calculated on the difference between the sale price and the original purchase price (the gain), after deducting any allowable costs such as purchase fees, improvement costs, and selling fees.
Planning ahead can help you strategically manage your CGT liability and make the most of available allowances and reliefs.
Some strategies include:
- Make full use of your annual CGT allowance.
Each individual has an annual exemption of £3,000 (2026/27 tax year), meaning gains up to this amount are tax exempt. Using your allowance effectively can reduce CGT liability, for example, by timing asset sales so that gains fall within the exempt limit each tax year.
- Spread asset disposals across multiple tax years.
If you are planning to sell assets that have significant gains, consider spreading disposals over two or more tax years. This can help you stay within the lower CGT bands and make the most of your annual allowance each year.
- Crystalise capital losses.
You may wish to sell assets at a loss in a tax year to register losses that can then either be offset against same year gains or carried forward into later tax years. These assets can then be bought back at the lower values, subject to certain restrictions to avoid falling foul of “Bed and Breakfasting” rules.
- Transfer assets to a spouse or civil partner.
Assets can generally be transferred tax-free between spouses or civil partners. By transferring a portion of your assets, both individuals can make use of their annual CGT allowance, potentially reducing the total tax paid when the assets are eventually sold.
- Utilise available CGT reliefs.
There are several reliefs available that can potentially mitigate CGT in certain circumstances:
Business Asset Disposal Relief (BADR)
Allows qualifying business owners to pay a reduced CGT rate of 18% on the first £1 million of gains when selling or disposing of all or part of their business.
Other reliefs
Depending on your circumstances, there may be reliefs available for agricultural property, investments in certain qualifying companies, or transfers to trusts.
- Maintain accurate records.
Maintaining detailed records of purchase prices, dates, costs, and improvements is essential. This ensures that if you decide to dispose of an asset, you can accurately calculate gains and claim any allowable deductions, helping to mitigate CGT liability where possible.
5. Start tax planning early in the year.
One of the simplest yet most effective ways to reduce your tax liability is to plan early.
Many individuals tend to review their tax position shortly before the end of the tax year of 5th April. However, key tax-saving opportunities for the year may have already passed by this point.
By reviewing your finances earlier in the year, you give yourself the time to:
- Identify unused allowances.
- Adjust income strategies, for example, optimising the balance between salary and dividends.
- Plan pension contributions to make the most of available allowances.
- Prepare your tax return ahead of deadlines to reduce last-minute stress.
Starting early not only helps improve tax efficiency but can also give you peace of mind, helps to avoid any potential surprises and gives you more control over your financial planning.
6. Claim all allowable business expenses.
HMRC allows business owners and self-employed individuals to deduct certain costs from their taxable profits, which can reduce the amount of tax owed. These are known as allowable business expenses and must be incurred wholly and exclusively for the purposes of running your business.
Common examples include everyday operating costs such as office supplies and equipment, marketing and advertising costs, business insurance and travel expenses incurred for business purposes.
If you work from home, you may also be able to claim a proportion of certain household costs (e.g. electricity bills), depending on how your home is used for business activities.
Additionally, keeping accurate records of your expenses throughout the year can make it easier to identify what you are entitled to claim. Not only can this help ensure you are making the most of the reliefs available, but it also helps demonstrate compliance with HMRC requirements should your records ever need to be reviewed.
7. Utilise your ISA allowance.
Individual Savings Accounts (ISAs) provide a tax-efficient way to save or invest, as any interest, dividends or capital gains generated within an ISA are tax-free in the UK. For the 2025/26 tax year, individuals can contribute up to £20,000 into ISAs, offering a valuable opportunity to build savings in a tax-efficient environment.
The type of ISA you select will depend on your personal circumstances and risk appetite:
| Type of ISA | Description | Risk level |
| Cash ISA | Offers a straightforward way to earn tax-free interest on your savings, making it a suitable option for those looking to preserve capital while benefiting from tax-efficient growth. | Low risk. Funds can typically be accessed, although some accounts may have restrictions or penalties for withdrawals. |
| Stocks and Shares ISA | Allows you to invest in assets such as shares, funds and bonds, offering the potential for higher returns over the longer term. | Medium to high risk (depending on the investment chosen). Funds can usually be accessed, although values may fluctuate and investments can fall as well as rise. |
| Lifetime ISA (LISA) | Designed to support first-time buyers or those saving for retirement. Contributions are capped at £4,000 per year and receive a 25% government bonus (up to £1,000 per year). | Low risk. Funds can generally only be accessed when purchasing your first home or from age 60. Withdrawals for other purposes may result in a government withdrawal charge. |
However, the 2025 Autumn Budget confirmed changes to personal finances, including Cash ISA allowances from 6 April 2027. For savers under the age of 65, the annual Cash ISA allowance will be reduced to £12,000, while those aged 65 and over will continue to benefit from the full £20,000 allowance. This means younger savers may need to think more carefully about how they allocate their overall ISA allowance between cash savings and investments.
As ISA allowances cannot be carried forward, reviewing your savings and investments before the end of the tax year can help ensure you make full use of your allowance and maximise the available tax-efficient benefits.
How can Cooper Associates Accountants help?
Navigating tax rules and planning your finances efficiently can be complex, particularly as legislation continues to change.
Our experienced accountants provide tailored advice designed to align with both your personal and business goals. By taking the time to understand your circumstances, we can help ensure you are making the most of available allowances, structuring your income efficiently and remaining fully compliant with HMRC guidelines.
Whether you require support with tax planning, preparing your self-assessment tax return or reviewing your wider financial position, our team is here to help.
Get in touch today to discover how our expert accountants can support you in taking a proactive approach to managing your tax affairs in 2026.
