In 2026, many individuals are set to face increased tax burdens, but there are strategies available to reduce your tax liabilities. Sarah Coles, the head of personal finance at Hargreaves Lansdown, details various methods to manage your tax obligations effectively.

One key aspect is the frozen tax thresholds, such as the personal allowance remaining fixed at £12,570 until 2031. This freeze could lead to individuals entering higher tax brackets as their income grows over time.

Additionally, changes in tax rates are expected, including an uptick in dividend tax rates from 8.75% to 10.75% for basic rate taxpayers and from 33.75% to 35.75% for higher rate taxpayers in April 2026. Furthermore, venture capital trusts will witness a reduction in tax relief from 30% to 20% during the same period.

The inheritance tax nil rate band and residence nil rate band will stay constant at £325,000 and £175,000, respectively, until 2031. Council tax is also anticipated to rise by up to 5% in April 2026, without the need for a referendum in England.

Moreover, the 5p per litre fuel duty reduction implemented in March 2022 will gradually return to normal levels by March 2027 starting from September 2026. Alcohol duty will escalate according to the RPI inflation rate from February 2026, with a one-time hike in tobacco duty as announced in the 2024 spring Budget by Jeremy Hunt.

A new duty of £2.20 per 10ml of vaping liquid will be imposed from October 2026. To mitigate these tax implications, Sarah Coles suggests five legal methods to cut down on taxes in 2026. Strategies include utilizing ISA saving accounts, maximizing pension contributions for tax relief, considering salary sacrifice, transferring income-producing assets between spouses, and leveraging the marriage allowance for tax-efficient planning.